US GDP Slows to 1.5% but Consumer Spending Jumps 3.4%
The Q2 GDP revision shows a modest headline, but household spending surged to 3.4% and final sales to private domestic purchasers rose 4.2%, pointing to underlying strength. The report expects 2.5% growth in H2.
Alpha Score of 40 reflects weak overall profile with moderate momentum, poor value, moderate quality, moderate sentiment.
The U.S. economy expanded at a 1.5% annualized rate in the second quarter, unchanged from the advance estimate. The composition, however, was stronger than the headline suggests.
Consumer spending, the main driver of growth, rose 3.4%, up from the initial 3.2% and well above the 0.5% pace in the first quarter. Both goods and services spending accelerated, the report said. Business investment also contributed, rising 8.5% led by a 13.6% gain in equipment and 8.8% in intellectual property. Spending on structures fell for the tenth straight quarter, while residential investment rebounded 1.2% after home sales picked up during the spring buying season.
The trade sector was a drag. Imports surged 12.5% (revised from 11.5%), while exports rose 4.5%, subtracting 1.1 percentage points from growth. Inventory investment also weighed, shaving 0.7 points off GDP.
A cleaner gauge of underlying demand, final sales to private domestic purchasers, which strips out trade, inventories, and government, rose 4.2%, accelerating sharply from 1.7% in Q1. The report pointed to that measure as a better read on momentum.
Real Gross Domestic Income, an alternative output measure, rose 2.2% after 1.2% in the prior quarter, confirming the economy's strength, the report said.
The second estimate brought no material changes to the GDP picture. The report looked through the modest headline, focusing on the solid gains in household spending and fixed investment, which together expanded at their fastest pace in 13 quarters.
Higher-frequency data through July suggests that momentum carried into the third quarter. The report expects the economy to sustain growth of 2.5% through the second half, though it noted headwinds from rising interest rates and volatile energy prices. The trade dispute with Canada added further uncertainty.
The dollar held steady after the release, with traders focused on the underlying details rather than the headline. For broader context, the forex market analysis shows how currency markets are processing the data.
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