Business investment declined at a 1.0% annualized rate last quarter, the government said in its third reading of second-quarter GDP on
Thursday. That was the steepest decline since the fourth quarter of
2015. Business investment was previously estimated to have declined at a
0.6% pace.It was pulled down by an 11.1% pace of decline in spending on
structures, which reflected drops in the categories of commercial and
healthcare, and mining exploration, shafts and wells.
After-tax profits without inventory valuation and capital consumption adjustment, which correspond to S&P 500 profits,
increased at a downwardly revised 3.3% rate. Profits were previously
reported to have advanced at a 4.8% rate in the second quarter.Weak
business spending and tepid profit growth could raise doubts on
consumers’ ability to continue driving the economy.
Gross domestic product increased at an unrevised 2.0% rate in the first quarter as the strongest consumer spending in 4-1/2 years offset
weak exports and a slower pace of inventory investment. The economy grew
at a 3.1% rate in the January-March quarter. It expanded 2.6% in the
first half of the year.
When measured from the income side, the U.S. economy grew at a 1.8% rate in the second quarter. Gross domestic income (GDI) was previously
reported to have increased at a 2.1% pace in the April-June quarter. It
rose at 3.2% rate in the first quarter.
The average of GDP and GDI, also referred to as gross domestic output and considered a better measure of economic activity, rose at a
1.9% rate last quarter, rather than the 2.1% pace estimated last month.
That was a slowdowng from a 3.2% pace of growth in the first three
months of the year.
The Trump administration’s nearly 15-month trade war with China is threatening the longest economic expansion on record, now in its 11th
year. The trade war has weighed on manufacturing and business
investment, and stoked fears in the financial market that a recession
was looming.
Federal Reserve Chair Jerome Powell said last week policymakers “expect the economy to continue to expand at a moderate rate,” but
reiterated that “weakness in global growth and trade policy uncertainty
have weighed on the economy and pose ongoing risks.”The U.S. central
bank cut interest rates again last Wednesday after lowering borrowing
costs in July for the first time since 2008.
The economy is largely losing speed as the stimulus from the White House’s $1.5 trillion tax-cut package and a government spending blitz
fades. Economists are forecasting growth this year around 2.5%, below
the Trump administration’s 3% target.
Growth in consumer spending, which accounts for more than two-thirds of U.S. economic activity, surged at a 4.6% rate in the second quarter.
That was the fastest since the fourth quarter of 2014 and was a slight
downward revision from the 4.7% pace estimated last month.
Consumer spending is being driven by the lowest unemployment rate in nearly 50 years. But a recent ebb in consumer confidence amid concerns
about duties on Chinese consumer goods, which came into effect in
September, could slow spending. Additional tariffs are on the way.
The trade deficit widened to $980.7 billion in the second quarter instead of $982.5 billion as reported last month. Trade cut 0.68
percentage point from GDP growth last quarter rather than 0.72
percentage point as previously reported.
Growth in inventories was revised slightly up to a $69.4 billion rate in the second quarter from the previously estimated $69.0 billion
pace. Inventories sliced off 0.91 percentage point from GDP growth last
quarter as reported in August. The slowdown in inventory accumulation
reflects robust consumer spending.
Government investment was raised as state and local government spending was much strong than initially thought. Spending on
homebuilding contracted for a sixth straight quarter, the longest such
stretch since the Great Recession.
President Donald Trump speaks to reporters as he departs for campaign travel to Minnesota from the South Lawn of the White House in
Washington, U.S., October 10, 2019.
Trump is on his way to an easy win in 2020, according to Moody’s accurate election model
