In this Thursday, May 19, 2016, photo, passers-by walk near the construction site a high-rise building in Boston. “Aside from technology and software, business spending was bad and housing was also surprisingly weak, which is payback for gains in recent quarters”.
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GDP increased at a 1.2 percent annual rate after rising by a downwardly revised 0.8 percent pace in the first quarter, the US Department of Commerce said yesterday.
The average growth pace in the first half of 2016 was only 1 per cent, weaker than the roughly 2 per cent average since the economic expansion began in 2009. GDP growth was revised down to a 0.8% pace in the first quarter from 1.1%. Analysts said that businesses will likely ramp up inventories in the coming months. The median projection was for a 2.5% increase for the second quarter.
Economists say uncertainty over global demand and the upcoming USA presidential election are also making companies cautious about spending.
GDP rose at a 1.2% annualized rate after a grim 0.8% advance in Q-1, US Commerce Department figures showed Friday.
Meanwhile, Capital Economics said the data makes a September interest-rate hike much less likely.
Over longer periods of time, however, quarterly fluctuations in inventory investment tend to be offsetting and have little impact on long-term growth, as shown in the chart below. Consumer spending, which accounts for more than two-thirds of US economic activity, increased at a 4.2 per concent rate. Gross private domestic investment tumbled 9.7 percent, and residential investment, which had been on the rise, reversed course and declined 6.1 percent, the first decrease since early 2014. This ranks among the three strongest quarters for consumer spending growth since 2006.
Or perhaps more than anything else, investors know this is another reason for the Fed to remain as dovish and accommodating as its policy mandates will allow it to be.
Trade was a slight positive in the second quarter, adding 0.2 percentage point to growth.
Fixed investment declined, weighed down by contractions in investment in both equipment and structures amid low oil prices as well as a notable decline in residential investment following eight straight quarters of increases.
Second-quarter GDP grew at a 1.2% annual rate, well below forecasts, as business investment fell for the third straight quarter.
The lower-than-expected figure could spark a fresh debate between Democrats and Republicans on the campaign trail about who is best equipped to grow the economy.
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While all-important consumer spending rose by a healthy 4.2 percent, business investment fell by 9.7 percent and inventories fell. 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. “This could foreshadow slower job growth ahead”. But a booming 287,000 new jobs were created in June, and that, along with expectations of a rebound in economic growth, had largely eased those concerns.
