The government left its estimate of a 1.0% annualized decline in Gross Domestic Product (GDP) unchanged this morning when it released its preliminary estimate (2nd release) of the largest measure of economic output.
Consumption, which makes up 70% of GDP, weakened after an upward blip in 1Q, and spending by businesses continued in a downward trend, though weakness eased, while inventory liquidations lopped off 1.4 percentage points from the headline number.
But uncertainty in the private sector was balanced by a jump in government spending and an improvement in the trade picture.
The second quarter, however, ended 7 weeks ago and it’s time to look ahead.
We are likely to see an end to the four-quarter losing streak that extends back to the 1940s when quarterly records were first kept.
A pick up in housing starts may snap what has been 14 straight declines in residential investment, and the massive liquidation of inventories, which has hurt GDP, may finally come to an end as manufacturers have begun to re-open idle production lines.
The Achilles heel of the economy remains consumer spending. Banks are not in the mood to take any major risks, and debt-burdened consumers are still worried about jobs, which may hamper expected gains in 3Q.
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