U.S. Economy Grows 2.1% in Q2 2019

With the United States economy currently enjoying its longest-ever expansion period, it would seem that each quarterly gross domestic product (GDP) report comes with enhanced emphasis. Thus this morning’s release showing 2.1% growth for Q2 has been met with mixed reactions and analyses. For example, while the second quarter’s 2.1% was a full point lower than Q1, it did “beat the street” as experts polled by MarketWatch had anticipated 1.9% growth. Additionally looking closer at the report brings both reasons to be optimistic as well as cause for concern.

Starting with the good news, consumer spending rose in the second quarter compared to the first. In fact, while Q1 marked a 1.1% increase, this quarter saw consumer spending climb 4.3%. Some of the top categories to see gains were new vehicles, food and beverages, and clothing.

Unfortunately, despite increased spending on the consumer side of things, businesses lowered their investments during Q2. Marketwatch notes that the 0.8% decline is the largest drop recorded in more than three years. Part of that pullback may be due to continued trade tensions — especially those with China. Lest we forget, this quarter also includes the period where President Trump threatened across the board tariffs on Mexican imports. Although those plans were eventually called off, the weeks-long uncertainty could have had a toll on business sentiment.

Speaking on what this latest GDP means for the U.S. economy, Glenmede investment strategy officer Michael Reynolds told CNBC, “The data clearly shows signs of a bifurcated economy. Weakness in manufacturing has weighed on components like inventories and fixed investment, but the healthy U.S. consumer has helped buoy the economy as seen in the stable reading on personal consumption expenditures.” He concluded, “Altogether, robust domestic consumers are more than offsetting the headwinds of a weakening manufacturing economy.” Meanwhile State Street Global Advisors chief investment strategist Michael Arone warned against predicting economic doom, declaring, “The recession talk was always overstated. Those that were doing the Chicken Little, the sky is falling, we’re headed for recession talk were clearly early in that assessment. The economic data continue to suggest that the economy isn’t near recession, at least in the next year or so.”

Looking ahead the Federal Reserve is widely expected to cut interest rates later this week, which could help turn business investment spending around. Elsewhere there’s also hope that China and the United States can resolve their trade issues, although progress has been slow on that front. In the meantime expect plenty of scrutiny to surround the coming jobs reports and, eventually, next’s quarter GDP results as our longest expansion rolls on.

Author

Jonathan Dyer

I'm a small town guy living in Los Angeles looking to make solid financial decisions. I write for a number of finance websites, including HuffingtonPost and Business2Community. I founded DyerNews.com in 2015 to focus on personal finance and the emerging FinTech markets.

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