Published: Sat, August 27, 2016
Economy | By Melissa Porter

Declining inventories curb US second-quarter growth; consumption surges

Declining inventories curb US second-quarter growth; consumption surges

Warm weather spurred retail sales towards a higher-than-expected rise of 1.4 per cent in July while those on jobseeker's allowance also tumbled 8,600 to 763,000 between June and July. Output will also likely get a boost as businesses restock warehouses after liquidating inventories in the second quarter.

Current-dollar GDP increased 3.4%, or $154.9bn, in the second quarter to a level of $18,436.5bn. In the first quarter, real GDP increased 0.8%. That was slightly down from the 1.2 percent rate it reported last month. Most economists expect another rate hike in December.

Profits at USA corporations have been stressed in recent years by the strong dollar, which makes US -made products more expensive for foreign customers-and low oil prices that have hammered the domestic energy industry.

With work hours increasing faster than output, US productivity has fallen in each of the past three quarters, the longest stretch of declining productivity since 1979, according to Labor Department data.

However, he also warned it would be a "considerable time" before the economy would expand by "anything like 0.6 percent" quarter-on-quarter.

"Business Investment grew in the second quarter, partly thanks to companies spending on transport equipment such as cars and planes".

British business investment increased in the three months to June, marking the first growth since the third quarter of previous year, figures from the Office for National Statistics showed Friday. GDI measures the economy's performance from the income side.

However, it could lose its gains against the dollar if the US Fed's chairmain Janet Yellen is seen as supportive of raising interest rates when she holds a meeting this afternoon. The release came in at +1.1% QoQ SAAR versus +1.22% SAAR in the first reading; that downward revision was bang-on economists' estimates. However, the lower profit margins sequentially for the broader, most economically relevant definition of profits indicate that it's not all good news for the corporate sector. Most recent evidence has suggested consumer demand is holding up well, with sunshine galvanizing shoppers, though forward-looking purchasing managers' indices for the construction, manufacturing and services sectors have showed weakness, as have industrial and manufacturing output figures. Inventories fell by a revised $12.4 billion, the first decline since 2011.

The economy was undermined by a decline in inventories for the quarter, which subtracted over 1.25% from GDP, the largest negative contribution for two years.

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