US economy grows less-than-expected in Q2 2016

The US economy grows more slowly than expected in Q2 2016, as the GDP expanded by disappointing 1.2% yoy and staying far below the economists forecasts. The US authorities revised the data for the first quarter downward to 0.8% (from 1.1%). The data heighten the risks of the economic outlook at a time when the US Federal Reserve hopes of steady improvement and plans to raise interest rates gradually. The consumption remains resilient but cautious business: companies reduce investment and aggressively reduce stock because of weak global markets, increased uncertainty and the continuing effects of the weak USD.

The private fixed investment, which includes residential and commercial expenses, decreased by 3.2% in the second quarter, which is the sharpest decline in seven years. These are preliminary data, as the second and third reading will be published in August and September.

The decrease in stock amounted to 8.1 billion USD, which is the sharpest decline since Q3 2011 and growth decreases by 1.16 percentage points. On the other hand, lower stock can lay the foundation for accelerated production in the second half of the year if demand remains high. The household consumption grows by 4.2%, which is the highest jump since the end of 2014 and added 2.83 percentage points to growth. The corporate costs for equipment, structures (construction of factories, shops, oil platforms, etc) and intellectual property decreased by 2.2%.

The stock and trade deficit are two of the most volatile components in the calculation of GDP. To gain a clearer picture of the demand in the US economy, analysts considered final sales to US customers, or GDP without stock and net exports. This indicator increased by 2.1% in the fourth quarter after the first recording growth of 1.2%.

Residential investment also hurt the growth and decreased by 6.1%. This is the biggest drop since Q3 2010 and the first decline in two years. The government spending also decreased by 0.9%, the most in more than two years.

Together with the GDP data for Q2 2016 was published also the information on inflation, as underlying index, which excludes energy and food, rose by 1.7% against 2.1% in Q1 2016.

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