According to a new Bureau of Economic Analysis advance report, gross domestic product (GDP) increased at an annualized rate of 1.2% in the second quarter, beating the last two quarters but falling far short of estimates.
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United States economic growth was unexpectedly tepid in the second quarter.
Indeed, it is unfortunate that while consumer spending is strong-and, more importantly, appears to be getting stronger-the report seems to suggest that the Federal Reserve is looking for yet more sustained and consistent improvement. Economists say uncertainty over global demand and the upcoming US presidential election are also making companies cautious about spending.
Gregory Daco, head of US macroeconomics at Oxford Economics, said the risks to the outlook are plain for all to see.
“Consumers did their job by spending robustly, which should partly be attributed to the $2 trillion in housing wealth accumulation in the past year”, Yun said.
Be proactive – Use the “Flag as Inappropriate” link at the upper right corner of each comment to let us know of abusive posts. The economy was previously reported to have grown at a 1.1 per cent pace in the first quarter.
The newest breakdown of the economy shows a slowing down of performance throughout the remainder of 2016.
The economy is expected to pick up steam in the second half of the year. Persistent first-quarter weakness in recent years had sparked a debate about these statistical quirks, prompting government agencies to revamp the process of smoothing discrepancies.
Consumer spending, which accounts for more than two-thirds of all USA economic activity, was responsible for nearly all of the rebound in GDP growth in the second quarter. It was the fifth straight quarter that inventories weighed on output.
“Second-quarter growth came in well below expectations and provides more evidence that the economy has weakened so far this year”, according to The Conference Board. At the same time, leaner inventories could set the stage for a pickup in production later this year should demand hold up. The Bloomberg survey median forecast for the second quarter was 4.4 per cent. In the first quarter, real GDP increased 0.8 percent (revised). Outlays for equipment dropped for the 4th Q in the last 5.
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.
Before Friday, the Atlanta Fed’s final projections had been a pretty decent indicator of how the government’s initial GDP report would turn out.
During the latest three-month period, growth was also trimmed because businesses slowed in their stockpiling of goods that are waiting to be sold. That was more than double the 1.6 percent rate in the first quarter.
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Business spending on equipment fell 3.5 percent after declining 9.5 percent in the first quarter. A measure of inflation, which is tied to consumer spending and strips out food and energy costs, climbed at a 1.7 per cent annualised pace compared with 2.1 per cent in the prior quarter.
