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GDP Report Carries a Mixed Message

Growth slows, but consumer spending takes off
By Newser Editors and Wire Services
Posted Jul 26, 2019 8:39 AM CDT
In this photo from Monday, July 22, 2019, the container ship Kota Ekspres is unloaded at the Port of Oakland in Oakland, Calif. On Friday, July 26, the Commerce Department issues the first estimate of...   (AP Photo/Ben Margot)

(Newser) – The US economy slowed sharply in the April-June quarter even as consumers stepped up their spending, per the AP. The gross domestic product, the economy's total output of goods and services, grew at a 2.1% annual rate last quarter, down from a 3.1% gain in the first quarter, the Commerce Department estimated Friday. But consumer spending, which accounts for 70% of economic activity, accelerated to a sizzling 4.3% rate after a lackluster 1.1% annual gain in the January-March quarter. Despite the slowdown in GDP from the previous quarter, the 2.1% growth means the economy is still expanding at what the Wall Street Journal calls a "healthy clip." In fact, the figure is slightly above estimates of 2.0%

Economists noted that business capital investment, which has been strong for the past two years, fell at a 0.6% annual rate in the April-June quarter, the first decline in three years. That weakness likely reflects, at least in part, a reluctance by businesses to commit to new projects because of uncertainty surrounding President Trump's trade war with China. Indeed, most analysts think the US economy could slow through the rest of the year, reflecting both global economic weakness and the trade war between the world's two largest economies. That is one key reason why the Federal Reserve is widely expected to cut interest rates next week and to signal that it may further ease credit in the months ahead.

(Read more GDP stories.)

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