US Gross Domestic Product Slows To 2.1% But Strong Consumer Spending Beats Wall Street Expectations

Economic growth decelerated during the second quarter as new tariffs coupled with a global slowdown took its toll on the US economy, according to the United States Department of Commerce. Fortunately the slowing rate of growth did not meet Wall Street’s expectations, hopefully suggesting that things are better than had been previously anticipated. 

Of course, it should be noted that slowing down is not necessarily a bad thing: after all, it is still growth.  GDP increased 2.1 percent, for example, which is down from 3.1 percent in the first quarter. On the other hand, this 2.1 percent is the weakest GDP measurement since the beginning of the current Presidential term. More importantly, perhaps, these numbers might tell a story that rejuvenates the economy by quelling concerns of a coming recession. 

Par for course, US President Donald Trump said the report is “not bad” noting that growth continues even with what he considers to be highly restricted monetary policy coming out of the Federal Reserve. 

It appears that both consumer and government spending have helped to propel GDP, at least in the period from April to June.  On top of this, a retraction of business investment have helped stabilize numbers. Specifically, personal consumption expenditures grew 4.3 percent, which is its best performance since the fourth quarter of 2017.  Also, government consumption expenditures grew 5 percent—as did gross investment—markings its fastest pace since the second quarter of 2009 (when the economy was trying to recover from the Great Recession). 

However, gross private domestic investment concurrently stumbled 5.5 percent, marking its worst performance since fourth quarter of 2015.  This was largely a result of a significant drop in structure spending—nearly 11 percent—which ultimately drained one full percentage point from the GDP number. 

Of course, many remain concerned about the escalating trade war between the United States and China.  The ongoing tariff battle continues to manipulate business sentiment, largely forcing executives to exercise extreme caution across all business strategies. Furthermore, the GDP report comes at a time when this concern is spreading to the rest of the world.  Even with strong consumer activity, manufacturing growth continues its slide, along with the housing market.