The economy grew at a 2.4% pace in the second quarter, the Commerce Department reported Friday, July 30, a little less than economists had predicted and slower than the upwardly revised 3.7% rate for the GDP in the first quarter. But a few other reports softened the bad news on the overall slowing of the recovery, adding to this year’s schizophrenic state of the economy.
Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York, said that analysts’ consensus estimate on the second quarter’s GDP was 2.7%, but despite the disappointing headline number, there were some underlying strengths to the economy.
“Consumption rose only 1.6% in Q2, much weaker than implied by the monthly data, while foreign trade was even worse than we expected, subtracting a huge 2.8% from the growth,” Shepherdson said in an analyst note.
But the positive news was elsewhere, he said, “Capital spending was strong, with equipment and software up 21.9% as replacement spending soared, and non-res structures rose 5.2%. Federal government spending was strong, with defense up 7.4% and non-defense–stimulus–leaped 13.0%.”
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Two other reports, added to the mixed economic news. The University of Michigan/Reuters consumer sentiment index for July rose slightly more than expected to 67.8 from a preliminary reading of 66.5. Economists expected it to rise to 67.