GDP grew at a scant 1.1 percent annual pace in the January-March quarter but is thought to have accelerated to a 2.6 percent rate in the April-June quarter, according to economists surveyed by data firm FactSet. Per the first (of three) calculations, the GDP only grew 1.2% in Q2, falling short of the expected pace of 2.5% GDP growth.
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The soft pace of growth could also complicate plans of the Federal Reserve to raise interest rates later this year, perhaps as early as September.
Companies were cutting back on their investments and reducing inventories amid uncertainty, while consumer spending remained robust, the Commerce Department said.
Consumer spending, however, was strong.
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Moulton said the BEA, part of the Department of Commerce, would work with other agencies to ensure that residual seasonality was removed from historical data by 2018.
First-quarter USA growth rates from 2013 through 2015 are less anemic, while subsequent rebounds are less hearty, revised data show.
The new breakdown shows a more pronounced slowdown in the economy heading into 2016. The economy was previously reported to have grown at a 1.1 percent pace in the first quarter. “This could foreshadow slower job growth ahead”. “That could prevent economic growth from breaking out”. However, the ongoing softness of growth in the second quarter will no doubt add to calls for policymakers to err on the side of caution and as such greatly reduces the chance of any rate hike before December. The fall in GDP was attributed to inventories, which fell for the first time since 2011 as companies buckled down amidst the global concerns that hung over financial markets for much of the second quarter. At the same time, leaner inventories could set the stage for a pickup in production later this year should demand hold up.
Nearly an hour into trading, Wall Street equities markets were less than exuberant, with the Dow Jones Industrial Average down almost half of a percentage point at 18,377.08, the S&P down 0.22 per cent at 2,165.20 and the Nasdaq down 0.15 per cent at 5,147.42.
Brexit was hardly worth noting because it was unexpected and took place in the final days of the second quarter.
And government spending declined 0.9% after rising steadily since late 2014 as defense outlays dropped by 3%.
The statement noted a strong rise in consumer spending at 4.2 per cent.
US economic growth had all the tools necessary to stage an impressive second-quarter comeback after a disappointing start to 2016.
BEA officials have acknowledged that the pattern of sluggish growth in the first quarter, followed by healthier gains, points to problems in its seasonal adjustments. That was the most since the third quarter of 2010 and marked the first decrease in two years.
Government spending slowed during the quarter, subtracting 0.2% from GDP, as both federal and local government spending increased at a modest rate of 0.4%. States and municipalities also cut back. That measure increased 2.1 percent last quarter after a 1.2 percent gain.
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