{"id":41807,"date":"2023-07-28T21:19:42","date_gmt":"2023-07-29T01:19:42","guid":{"rendered":"https:\/\/ifintechworld.com\/investing\/why-the-gdp-report-wasnt-as-good-as-it-appeared\/"},"modified":"2023-07-28T21:19:44","modified_gmt":"2023-07-29T01:19:44","slug":"why-the-gdp-report-wasnt-as-good-as-it-appeared","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=41807","title":{"rendered":"Why the GDP Report Wasn&#8217;t as Good as It Appeared"},"content":{"rendered":"<div id=\"js-article__body\" itemprop=\"articleBody\" data-sbid=\"WP-BAR-0000704601\">\n<div data-layout=\"wrap\n              \" data-layout-mobile=\"\" class=\"\n        media-object\n        type-InsetMediaIllustration\n          wrap\n  article__inset\n        article__inset--type-InsetMediaIllustration\n          article__inset--wrap\n  \"><\/p>\n<figure class=\"\n        media-object-image\n        enlarge-image\n        img-wrap\n        article__inset__image\n      \" itemscope=\"\" itemtype=\"http:\/\/schema.org\/ImageObject\"><\/p>\n<div style=\"padding-bottom:66.66666666666666%;\" data-subtype=\"photo\" class=\"image-container  responsive-media article__inset__image__image\"><\/div>\n<\/figure><\/div>\n<p>The U.S. economy grew by 2.4% in the second quarter, based on initial estimates, outpacing both first-quarter growth of 2% and consensus expectations of 1.5%. But economic activity wasn\u2019t quite as robust as the headline number suggests, given decelerating growth in consumer spending. <\/p>\n<p>That leaves the economy more dependent on the more volatile components of gross domestic product, namely business investment and government spending. \u201cGDP growth in the second quarter was stronger than expected, but the result is hiding a strong slowdown in consumer demand, which accounts for two thirds of GDP,\u201d says Eugenio Aleman, chief economist at Raymond James. <\/p>\n<div class=\"paywall\">\n<p>Personal consumption expenditures grew by 1.6% in the quarter, down from the first quarter\u2019s 4.2%. In general, Americans spent more on services than goods in the period.<\/p>\n<p>\u201cConsumers are still willing to spend, but they have become increasingly cautious and selective amidst still-high prices and tighter credit conditions,\u201d says Gregory Daco, chief economist at Ernst &amp; Young\u2019s global strategy consulting arm. \u201cThis has translated into much slower consumer-spending momentum after a strong start to the year.\u201d<\/p>\n<p>Thursday\u2019s GDP number likely confirms the idea that the U.S. economy will have a soft landing, wherein inflation moderates without a significant economic downturn, Daco says. But it is unlikely to alter the Federal Reserve\u2019s tough stance on taming inflation.<\/p>\n<p>Fed Chair Jerome Powell reiterated at Wednesday\u2019s Federal Open Market Committee briefing that central bank officials will be \u201cdata dependent\u201d in making future monetary-policy decisions. The GDP report adds an important data point to the discussion, as will Friday\u2019s release of the July jobs report and the quarterly employment cost index.<\/p>\n<p>The other big news in the GDP report is that businesses are opening their pocketbooks again after a cautious start to the year \u2014 the inverse of consumer behavior. Nonresidential fixed investments, which include commercial real estate and equipment spending, rose by a healthy 7.7% during the second quarter. That was up from 0.6% during the first three months of 2023.\u00a0<\/p>\n<p>The surge in business spending reflects expressions of renewed optimism about the U.S. economic outlook during a recent round of second-quarter earnings calls.<br \/>\n        Coca-Cola<br \/>\n       (ticker: KO) CEO James Quincey<strong>\u00a0<\/strong>noted in the beverage giant\u2019s latest earnings call that inflation was moderating and\u00a0<br \/>\n        Kimberly-Clark<br \/>\n       (KMB) CEO Michael Hsu said costs had stabilized.<\/p>\n<p>Goldman Sachs CEO David Solomon also saw some room for optimism. \u201cThere\u2019s no question recent economic data in the U.S. indicates the Fed\u2019s efforts to fight inflation are showing progress, and we are starting to see more optimism about the forward trajectory,\u201d he said during the bank\u2019s earnings call.\u00a0<\/p>\n<p>Government spending rose solidly in the three months ended June, although by the smallest percentage since the second quarter of 2022. Overall spending rose 2.6%, with federal outlays up 0.9% and state and local outlays gaining 3.6%. That\u2019s due, in part, to continued growth in infrastructure spending.<\/p>\n<p>\u201cWe are seeing slower but still positive business investment and a favorable tailwind from the government sector, which shouldn\u2019t be underestimated,\u201d Daco says. <\/p>\n<p>Daco doesn\u2019t see consumer spending reaccelerating this year, given that Americans are battling tight credit conditions and have less excess savings than in prior postpandemic quarters. The resumption of student-loan repayments and rising debt balances are also headwinds. He predicts that consumer spending will advance by a modest 1.9% overall in 2023, and show muted growth of 0.8% in 2024.<\/p>\n<p>Thursday\u2019s GDP report is only a preliminary estimate, with the next estimate of second-quarter economic activity due on Aug. 30.<\/p>\n<p>Write to Megan Leonhardt at megan.leonhardt@barrons.com<\/p>\n<\/p><\/div>\n<\/div>\n<p>Read the full article <a href=\"https:\/\/www.marketwatch.com\/articles\/gdp-growth-consumer-spending-problem-db955fb1?mod=investing\" target=\"_blank\" rel=\"noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The U.S. economy grew by 2.4% in the second quarter, based on initial estimates, outpacing both first-quarter growth of 2% and consensus expectations of 1.5%. But economic activity wasn\u2019t quite as robust as the headline number suggests, given decelerating growth in consumer spending. That leaves the economy more dependent on the more volatile components of [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":41808,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"video","meta":{"footnotes":""},"categories":[239],"tags":[83],"class_list":["post-41807","post","type-post","status-publish","format-video","has-post-thumbnail","hentry","category-investing","tag-featured","post_format-post-format-video"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Why the GDP Report Wasn&#039;t as Good as It Appeared | iFintechWorld<\/title>\n<meta name=\"description\" content=\"The U.S. economy grew by 2.4% in the second quarter, based on initial estimates, outpacing both first-quarter growth of 2% and consensus expectations of\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" 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