Economic Update: U.S. GDP
The government’s first revision to the growth rate of the nation’s GDP in the second quarter of 2016 came in weaker than expected.
The revision for Q2 GDP growth rate was reported at +1.2%, which was less than half analyst expectations for a reading of +2.5% but above the initial estimate of +1.1%.
According to the report, the slight decline in GDP growth from the previous estimate was triggered by a larger decline in inventories.
Consumer spending, which is the primary driver of the U.S. economy and a closely watched measure of consumer activity, surged to an annual rate of +4.2%. This was the highest level since the end of 2014.
The bad news is that inventories fell and business fixed investment disappointed. The report indicates that inventories were reduced by the largest amount since the third quarter in 2011 and corporate spending on what is called “fixed investment” fell at an annualized rate of 2.2%.
The upside to the report is that the punk data could easily be enough to keep the Fed on the sidelines until December or early 2017.