GDP Growth Anemic In Second Quarter
August 29, 2001
The U.S. economy is growing, but barely. New figures released this morning from the Commerce Department show economic growth increased 0.2% annual rate through the second quarter of the year, a downward revision from 0.7%.
The increase marks the lowest performance of this gauge, which measures the total economic output of U.S. goods and services, since the first quarter of 1993, when the economy shrank 0.1%. If there is an upside to all of this it’s that while the revised figure is lower than the first quarter’s growth rate of 1.3%, it did beat many analysts' forecast of a zero, or even negative, growth rate.
The Commerce Department also reported exports and investment were down slightly, mostly for computers and telecommunications equipment, which was expected.
The growth of consumer spending, in contrast, was revised upward from 2.1% to 2.5%. The biggest change -- from 6% to 7.1% -- was for consumer durable goods. Inventories, meanwhile, were revised down.
Newport Communications Senior Economist Jim Haughey says while this 0.5% reduction in second quarter growth in not pleasant, it is history.
“This happened as much as four months ago. What’s important is the implications for future growth. The markdowns in trade and investment mean that the spending and freight trends are lower in these two sectors than we previously thought. Conversely, the sizable boost in consumer spending means that spending is this key sector - two-thirds of the economy - is stronger than we thought.”
Hauguey noted that the downward revision of inventory, while lowering GDP, means that there will be less of an inventory drag on future production. The inventory draw-down in the second quarter reduced GDP by 1.5 percentage points. Had inventories remained steady from the first quarter, second quarter GDP growth would have come in at 1.7%.