Newsroom
July 29, 2016
Long: 2Q GDP growth 'disappointing'
The first estimate for gross domestic product growth in the second quarter was 1.2 percent – a "disappointing" figure, according to NAFCU Chief Economist and Director of Research Curt Long.
Businesses cut inventory stockpiles, and investment spending and residential investment contracted as well, according to a NAFCU Macro Data Flash.
"The latest GDP report highlights the growing divide between consumer sentiment – which remains buoyant in light of a strong stock market, surging real estate values and cheap gas – and business confidence," Long said. "The chief drag on the economy continues to be a dearth of business investment, which in the second quarter included a large downsizing of inventories. But households are continuing to spend, and at the moment that is providing enough momentum to ward off a recession. The fact that residential housing subtracted from the overall tally is a bit of a mystery as housing starts have been strong lately, and there could be a positive revision forthcoming.
"As for the Fed, this report makes a September rate hike less likely as the working margins continue to thin and the specter of a recession looms. Inflation strengthened during the quarter but remains below the Fed's target," he continued.
Personal consumption expenditure (PCE) inflation, the Fed's preferred inflation metric, strengthened in the second quarter to 1.9 percent from 0.3 percent in the first quarter, but still did not hit the Fed's target of 2 percent.
Businesses cut inventory stockpiles, and investment spending and residential investment contracted as well, according to a NAFCU Macro Data Flash.
"The latest GDP report highlights the growing divide between consumer sentiment – which remains buoyant in light of a strong stock market, surging real estate values and cheap gas – and business confidence," Long said. "The chief drag on the economy continues to be a dearth of business investment, which in the second quarter included a large downsizing of inventories. But households are continuing to spend, and at the moment that is providing enough momentum to ward off a recession. The fact that residential housing subtracted from the overall tally is a bit of a mystery as housing starts have been strong lately, and there could be a positive revision forthcoming.
"As for the Fed, this report makes a September rate hike less likely as the working margins continue to thin and the specter of a recession looms. Inflation strengthened during the quarter but remains below the Fed's target," he continued.
Personal consumption expenditure (PCE) inflation, the Fed's preferred inflation metric, strengthened in the second quarter to 1.9 percent from 0.3 percent in the first quarter, but still did not hit the Fed's target of 2 percent.
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