Thanks primarily to a strong boost from private consumption, the US economy grew by 2.1 percent over the year as a whole in the second quarter. Compared to the strong start to the year, the growth momentum has thus slowed down less than expected. On the other hand, the significant slowing effects of foreign trade and inventories are in line with our expectations. On the one hand, these had clearly supported growth in the first quarter. On the other hand, both factors have been reflecting the ups and downs of the trade conflict with China for about a year now and are therefore showing strong fluctuations.
The latest figures show that private consumption continues to fulfil its role as a growth guarantor. Given the very good employment situation in the USA, this is not too much of a surprise. After two consecutive quarters of rather subdued growth rates in private consumption, doubts arose about the robustness of the US economy. Ultimately, however, the „shutdown“ lasting several weeks at the turn of the year had only temporarily curbed consumer momentum.
However, not only foreign trade and inventory development slowed in the second quarter, but also private investment. Investments in commercial buildings declined surprisingly sharply. At the same time, investment in machinery and equipment grew only slightly, having already fallen slightly in the first quarter. In addition, the downward trend in residential construction does not seem to have come to an end: a decline was reported for the fifth quarter in a row.
Thus, the latest GDP data, which at first glance show a rather solid US economy, nevertheless provide the Federal Reserve with arguments for a slight interest rate cut as an „insurance step“. The restrained investment activity is in line with the industrial climate, which has become visibly cloudier in the meantime. In many plants uncertainty has spread because of the continuing conflict with China. However, the continuing good mood among service providers and consumers is an argument against the need for monetary policy action. On the other hand, it is very questionable whether there will be an agreement with the Chinese leadership in the near future. And a continuing dispute should sooner or later also cause uncertainty in the service sector and among consumers.