It was the fifth consecutive quarter in which weak inventory building has dampened the economy’s growth.
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According to a new report from Zero Hedge, the U.S. Bureau of Economic Analysis (BEA) has taken a page out of the Bureau of Labor Statistics (BLS)’ book … which is to say it is messing with the numbers to make them look better. Still, even tepid growth would be preferable to the possible recession that some had feared might be nearing after the economy’s woeful start to the year. But the government sector trimmed growth by 0.2 percent, reflecting weakness at both the federal and state and local levels.
Economists surveyed by Bloomberg had expected that the nation’s gross domestic product grew at a 2.5 percent pace in the second quarter.
The biggest factor for the shortfall in GDP growth last quarter was that businesses reduced their restocking by the most since 2011.
Federal Reserve is looking for some visible improvement for policy making.
In a statement, the Fed noted that the near-term risks to the economic outlook had “diminished”.
The Commerce Department estimates are based on incomplete data and are subject to regular revisions.
The dollar fell against a basket of currencies, while prices for US government bonds rose.
The jump in consumer spending indicates so-called final sales to domestic purchasers, or GDP excluding trade and inventories, probably accelerated after climbing at an inflation-adjusted 1.2 percent rate in the first quarter. Ashworth predicts only one interest rate increase this year, in December.
The US economy grew much less than expected in the second quarter, according to preliminary data released by the Commerce Department on Friday.
Or not. Perhaps the drop in inventories signals a real decline in the economy. “More homes need to be built and that in turn will lead to faster economic growth”.
“Our read is that the unwinding of the energy boom has produced a larger drag than had been previously reported”, said Mark Vitner, a senior economist at Wells Fargo Securities in Charlotte, North Carolina.
Traders were also reacting to the Bank of Japan’s highly anticipated monetary policy announcement, which was seen as a disappointment.
Household spending was the economy’s bright spot, rising at an annualized rate of 4.2 percent.
Also holding back economic growth in the second quarter was a decrease in residential investment, which fell at a 6.1 percent pace. “Business spending is under pressure”. Prospects for business spending are not encouraging. This report will be revised, and this could swing lower or could rise.
Consumer spending was very strong – up 4.2% – but housing and business investment declined.
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But Brad McMillan, chief investment officer for Commonwealth Financial Network, thinks consensus is a tad high and ticks off a few reasons why the actual growth figure might come in weaker than forecast.
