Final US GDP Reading Slower Than Expected - A Harbinger Of Worse To Come?
The Commerce Department's final measure of US growth a disappointment to policy makers and dollar bulls. After the marked, positive revision to the reading from the advanced to preliminary figures (1.9 percent to 3.3 percent), confidence boomed as many perhaps believed such a strong clip of growth could withstand a battering through the second half. However, the final reading on the expansion through the three months ending in June would knock the optimism down a peg by lowering the broad activity gauge to 2.8 percent. This may seem to be a modest revision, but it amplifies the dour forecasts for growth through the second half of the year. With the consumer responding to rising unemployment and fading wage growth by tempering spending habits, exports losing ground with global growth cooling and business investment curbed by a financial crisis and record raw material prices, forecasts for the third quarter are not promising - though the dollar may not be pricing in this prognosis quite yet. Looking at the details of the final 2Q reading, the weight on the indicator would be the most necessary components. Personal consumption was revised down to 1.2 percent from 1.7 percent (many analysts believe we won't see any more growth from this sector again this year). Exports edged down from 13.2 percent to 12.3 percent. On the positive side, private investment didn't suffer as painful a contraction as the preliminary or advanced number had suggested. Business and consumer investment fell 11.5 percent - still the biggest weight on growth.