United States: GDP drops at a slower pace in the second quarter
GDP contracted 0.6% in seasonally-adjusted annualized terms (SAAR) in Q2 (Q1: -1.6% SAAR). That said, the reading was dampened by a negative contribution of nearly 2 percentage points from a drawdown in private inventories.
Private consumption increased 1.5% in the second quarter, which was below the first quarter’s 1.8% expansion. Government spending fell at a slower rate of 1.8% in Q2 (Q1: -2.9% SAAR), dragged down by the sale of oil from the government’s strategic reserve. Meanwhile, fixed investment contracted 4.5% in Q2, marking the worst result since Q2 2020 (Q1: +7.4% SAAR) and largely driven by a double-digit drop in residential investment. The drop in residential investment was likely motivated by housebuilders’ concerns over the outlook for the real estate sector.
On the external front, exports of goods and services bounced back, growing 17.6% in Q2 (Q1: -4.8% SAAR). Conversely, imports of goods and services growth moderated to 2.8% in Q2 (Q1: +18.9% SAAR).
On an annual basis, economic growth lost momentum, cooling to 1.7% in Q2, from the previous period’s 3.5% growth.
Despite marking the second straight quarter of contraction, the Q2 GDP reading was not so bad considering that private consumption continued to expand and exports returned to growth. As such, the National Bureau of Economic Research—the official arbiter of U.S. recessions—does not yet consider the economy to be in recession.
Looking ahead, the Consensus is for muted quarter-on-quarter expansions in GDP over the next several quarters, although several panelists now see shallow contractions from Q4 heading into H2 2023.