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Economy still growing, but at a slower pace

Posted at 8:43 AM, Jul 26, 2019

The US economy grew at an annual rate of 2.1% in the second quarter, the Commerce Department announced Friday.

That's better than economists had expected, but slower than the 3.1% pace in the first quarter .

The middling result was powered by a strong increase in consumer spending and government spending, but dragged down by a large decrease in business investment, particularly in real estate, which had been much stronger in 2018.

Indicators of consumer confidence have diverged from measures of business sentiment in recent months, as companies have fretted about the potential implications of rising trade tensions while regular Americans have continued to benefit from low unemployment and solid wage growth.

Consumer spending was robust, growing at a 4.3% annualized rate in the second quarter, up from only 1.1% in the prior quarter. Spending on durable goods, which includes long-lasting items like cars and furniture, was particularly strong, growing at a 12.9% annualized rate.

As expected, the factors powering last quarter's growth — a buildup in business orders and a fall in imports — reversed dramatically this quarter. Exports, which add to US economic growth, shrunk at a 5.2% annual pace, as compared to the previous quarter.

The shape of economic growth also changed slightly over the past few years, as the Bureau of Economic Analysis revised back five years of data. The economy now looks stronger in 2017 than it was before the revisions, for example.

As for the second quarter of 2019, the better-than-expected 2.1% headline number is not likely to provide additional reason for the Federal Reserve to cut interest rates at its meeting next week, as it has signaled it might do.