August Business Conditions Monthly

by 
Friday, August 12, 2016
Chart 1. Consumer spending gains as business investment weakens.
AIER leading indicators suggest slow growth as consumer strength offsets business investment weakness.

The latest data on real gross domestic product, or GDP, show that the economy expanded an anemic 1.2 percent in the second quarter of 2016. That is the first time the U.S. economy has posted three consecutive quarters of growth below 1.5 percent since the time of the Great Recession.

The weak showing masks widely divergent performance among the GDP components. Consumer spending continues to grow, with real personal consumption expenditures rising a strong 4.2 percent. On a year-over-year basis, real personal consumption spending accelerated to 2.7 percent from 2.4 percent in the first quarter. This contrasts starkly with business investment, which declined on a year-over-year basis for the second quarter in a row (Chart 1). Government spending and inventory liquidation also dragged down growth. We expect the current pattern of consumer-led growth to continue. The weakness in business investment may be laying the foundation for a surprise uptick in real GDP growth in the second half.
 

 

 

Next/Previous Section:
1.Overview
2. Economy
3. Policy
4. Investing
5. Appendix

Chart 1. Consumer spending gains as business investment weakens.