Q2 GDP Rises By A Weak 1.3%

Economic growth remained sluggish in the second quarter, the government reports. Real GDP rose at a 1.3% annualized pace during April through June, the slowest pace since the recession ended. That’s up from the anemic 0.4% rate in Q1, but no one will confuse the latest number as anything other than a weak performance. The best you can say is that the growth rate is once again moving in the right direction. The trick is whether it’ll continue moving higher.

The main drag on economic growth in Q2 was the virtual standstill in consumer spending. Personal consumption expenditures, which represent more than two-thirds of GDP, rose at annual rate of just 0.1% in the three months through June—the slowest pace since the recession was formally declared at an end in June 2009 via NBER. Durable goods in particular took a hit, dropping 4.4%.

None of this is particularly surprising. It’s been clear for some time that the economy slowed in the spring. Today’s GDP report, like all GDP reports, formally restates what was already clear by monitoring the economic news as it arrived. That doesn’t make today’s numbers any more palatable, of course.

One bright light is the faster pace in gross private domestic investment, which gained 7.1% in Q2. That’s up from 3.8% in the previous quarter. In addition, exports held up fairly well, rising 6% in Q2, although that’s down slightly from Q1’s 7.9% gain.

Otherwise, today’s report is filled with humbling numbers. “The economy is stuck in a very slow-growth scenario,” says Julia Coronado, chief economist for North America at BNP Paribas. “Consumers are still very cautious and vulnerable. This is a very challenging report for policy makers.”

It’s not so great for the rest of the country either. In any case, it’s all about what happens next. What optimism there is hangs by a thread these days, much of it clinging to yesterday’s relatively encouraging news on jobless claims. But even that thin reed doesn’t mean much until the debt uncertainty in Washington is cleared up. Don’t hold your breath. As CNNMoney reports, “the debt ceiling debate has degenerated into another messy display of congressional dysfunction.”

About James Picerno 894 Articles

James Picerno is a financial journalist who has been writing about finance and investment theory for more than twenty years. He writes for trade magazines read by financial professionals and financial advisers.

Over the years, he’s written for the Wall Street Journal, Barron’s, Bloomberg, Dow Jones, Reuters.

Visit: The Capital Spectator

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