The Economy

GDP Growth Slows to 2.1% in Second Quarter

Consumers increased spending while exporters and manufacturers cut back.
GDP Growth Slows to 2.1% in Second Quarter

Real gross domestic product increased at an annual rate of 2.1% in the second quarter of 2019, down from 3.1%, the Commerce Department said, as falling business investment was offset by an increase in spending by consumers.

Economists polled by MarketWatch said they expected an increase of 1.9%.

It was the weakest quarterly growth since the first quarter of 2017.

Drive Business Strategy and Growth

Drive Business Strategy and Growth

Learn how NetSuite Financial Management allows you to quickly and easily model what-if scenarios and generate reports.

The numbers are subject to revision, and a second estimate for the quarter will be released on August 29.

Real GDP grew 3.1% in the first quarter, the same as previously published, the Commerce Department said.

“Even in the face of a variety of sources of uncertainty and broad indications that the economy slowed in recent months, the first look at [second-quarter] growth holds more positives than negatives,” Plante Moran Financial Advisors chief investment officer Jim Baird said. “Certainly weaker business investment shouldn’t be overlooked, but the strength of the consumer sector also shouldn’t be dismissed.”

Business investment in structures such as office buildings, manufacturing plants, and drilling rigs fell almost 11%, as fixed investment fell 0.8%, its biggest decrease in three and a half years. Consumer spending increased 4.3%, up from 1.1% in the first quarter. Spending on residential housing fell 1.5%, the sixth consecutive quarter of declines. Business inventories fell $44.3 billion, the biggest decrease in a year.

The PCE index, the Federal Reserve’s preferred measure of inflation, increased 1.4% year over year. The central bank could cut interest rates as early as next week.

“Given the persistent protectionist draft, the lingering policy uncertainty breeze, the sniffling global economy, and the cooling room temperature at home, now may be an opportune time for a Fed immunization shot,” economists Gregory Daco and Jake McRobie said in a note to clients.

Government spending increased 5% in the second quarter, helping offset the impacts of the government shutdown in the winter.