The U.S. Commerce Department is about to publish the United States (US) GDP data for the second quarter today and we expect growth at an annual rate of 1.7%, at the same time showing a fairly strong performance.
However, this figure will reflect a slower growth rate compared to the previous quarter, at the same time showing a moderate trend.
The expected weakness in second quarter GDP was mainly focused in the residential investment sector, where the increase in new construction was partially offset by lower home renovation spending and sluggish real estate agent commissions.
Furthermore, net exports are expected to be affected by the significant decline in exports at the beginning of the last second quarter.
Despite these challenges, the underlying breakdown of GDP is expected to show positive signs, particularly in consumer spending and capital investment.
Real Personal Pension Expenditure (PCE) is expected to increase at an annual rate of 1.5% in the second quarter, following a strong increase of 4% in the first quarter.
Additionally, business investment spending has been a bright spot in the economy, and a recovery in equipment spending is expected after two consecutive quarters of decline, driven by strong delivery data, particularly in the aircraft sector.
Furthermore, inventories are expected to give impetus to GDP growth after experiencing relatively small construction in the previous quarter.
Businesses, in an effort to protect themselves from supply chain disruptions, have increased inventory levels, leading to a net positive impact on GDP growth in recent quarters.
It is important to remember that while inventory growth has occurred significantly, it also presents unique challenges.
Even if it is increasing, inventory at certain times can also act as a barrier to overall GDP growth, showing a peculiarity in calculating the contribution of inventory to GDP.
Also, we expect more moderate inventory changes to occur in the second quarter, as manufacturers are careful not to produce too much in the current cycle.
This conservative approach is expected to contribute as much as $45.4 billion to GDP, equivalent to 0.83 percentage points of the 1.7% growth predicted for the period.
Overall, the economy has shown resilience amid aggressive tightening policies by the Federal Reserve.
Even so, we expect further moderation in the second half of the year, with tighter funding standards likely to affect the economic landscape.
Although the debate about the possibility of a recession is still ongoing, the overall consensus points to a slower growth trajectory in the near future.
