Pages Navigation Menu

United States news, headlines, events , stories and all that is trending today

Another whiff on the economy: Q2 GDP only grew 1.2%

The US economy continues its pattern of stagnation, and once again economists got fooled into thinking that it had changed. 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. Markets had predicted a GDP increase of 2.6% — itself no great shakes:

Real gross domestic product increased at an annual rate of 1.2 percent in the second quarter of 2016 (table 1), according to the “advance” estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 0.8 percent (revised).

The Bureau emphasized that the second-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency (see “Source Data for the Advance Estimate” on page 2). The “second” estimate for the second quarter, based on more complete data, will be released on August 26, 2016.

The Q2 report also has downward revisions to Q1, especially in gross domestic income (GDI). Some economists consider GDI a better measure of economic growth, but in Q1 it didn’t matter much either way. The new report revised Q1 GDI from +2.9% to +0.9%, which might make the argument that we should stick with GDP after all. As noted above, Q1 GDP got revised from 1.1% to 0.8%.

Just how long has it been since we’ve seen decent quarterly growth? It’s been two years since the US economy produced an annualized growth rate of 3% or better:

bea-gdp

The one bright spot, relatively speaking, is in the final sales of domestic product. That increased 2.4%, double the rate of overall GDP, and would normally indicate a deeper use of inventory. That would normally hint at future growth, but this same measure has been running ahead of overall GDP for several quarters in a row, and so far it doesn’t appear to herald any new burst of expansion.

The Associated Press gives more insight into the inventory issue, as well as the string of unpleasant surprises:

The government also revised down its estimate of first-quarter growth to 0.8 percent from 1.1 percent. The economy has now grown at lackluster rates for three straight quarters.

Consumer spending, which accounts for 70 percent of economic activity, did accelerate in the spring, growing at an annual rate of 4.2 percent. That was more than double the 1.6 percent rate in the first quarter. It was the strongest surge for consumer spending since the final three months of 2014.

But business slowed further restocking of their shelves, which cut growth by 1.7 percentage points in the second quarter. Businesses have struggled for more than a year to get their stockpiles more in line with sales. The inventory slowdown in the spring was the sharpest since the first quarter of 2014.

The Wall Street Journal reports on the disappointing results, and notes its place in the history of post-recession economies:

The gain marks only a slight acceleration from the first quarter, when GDP advanced at a downwardly revised 0.8% pace. The first quarter was previously seen as increasing 1.1% from the prior period.

The economy has grown at less than a 2% pace for three straight quarters. Since the recession ended seven years ago, the expansion has failed to achieve the breakout growth seen in past recoveries. The average annual growth rate during the current business cycle remains the weakest of any expansion since at least 1949.

Lackluster growth could be a concern to Federal Reserve officials considering whether the economy is strong enough to absorb higher interest rates later this year. It could also influence voters weighing the economic track record during Barack Obama’s administration before electing a new president in November.

Early last week, Bloomberg wondered whether a recession was looming for the US. These results won’t allay those fears, and it won’t take much worse results to tip us over into one:

If the US economy does tip over into a recession, then it will play against the continuity argument for electing Hillary Clinton and might push voters into the arms of Donald Trump. It also makes Barack Obama’s “All is well!” speech this week at the Democratic convention look more out of touch than it did Wednesday night. Team Hillary and the White House have to be very, very nervous about these trends.

This post is from Hot Air » Top Picks. Click here to read the full text

The best life hacks ever revealed to help make things easy everyday

Follow us on twitter @UnitedStatesTD

Also, Like us on facebook

Leave a Comment

Your email address will not be published. Required fields are marked *