This contrasted with economists’ expectations for growth of 2.6% during the quarter.
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A separate report from the Labor Department on Friday showed labor costs increasing at a steady 0.6 percent rate in the second quarter, matching the prior quarter’s rise. “American consumers are pretty much driving growth around the world”. Average second-quarter growth is now 2.5 per cent, down from 3.2 per cent, and third-quarter growth is 3.4 per cent, up from 3.1 per cent. Fourth-quarter growth in those three years remains 2.4 per cent, on average, the same as before.
That is, until the quarter’s growth metrics were published Friday by the Bureau of Economic Analysis. This is especially likely in the housing category where utility use is driven to a large extent by the weather. “This could foreshadow slower job growth ahead”.
The latest gross domestic product (GDP) numbers confirm that the US economy remains mired in slower-than-desired growth despite recent signs of progress in some data points.
Business spending on equipment fell 3.5 percent after declining 9.5 percent in the first quarter.
There were also declines in investment in residential construction and spending by the government. The drop may not continue, but we are unlikely to see a substantial turnaround.
Business spending has been hurt by lower oil prices, which have squeezed profits in the energy sector, forcing companies to cut capital spending budgets. The last time the economy grew at a robust rate of more than five percent? Companies’ nonresidential fixed investments – or purchases of new equipment and facilities to help foster increased productivity and profitability – fell sharply again in the latest GDP release and has now contracted in three straight quarters.
In a year when the Fed was supposed to be on an orderly rate-hike pace of one per quarter, Wall Street now is talking about an economy that’s not going anywhere and a central bank that will follow suit.
The gain marks only a slight acceleration from the first quarter, when GDP advanced at a downwardly revised 0.8% pace. Imports of services rose at a 1.5 percent annual rate, its fifth consecutive increase.
Analysts said the disappointing second quarter GDP report would likely give the Federal Reserve pause about raising rates as soon as September. Personal-consumption growth in the second quarter jumped to 4.2% from 1.5%, showing that spending remained an important driver of economic growth. The pace of that spending had slowed to its weakest pace in two years during the January-March quarter.
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Looking at the whole of 2015, the United States economy grew 2.6 per cent compared with the previous year – higher than the 2.4 per cent as previously estimated. While growth is expected to rebound in the second half, expansion for 2016 will probably fall short of 2 percent. Concerns at the Fed and elsewhere about overly rapid growth seem to be seriously misplaced.
