SEPTEMBER 3, 2019 – ADJUSTED Q2 ECONOMIC DATA BODES WELL FOR US ECONOMY
Second quarter US GDP results were revised slightly down to 2% from the 2.1% initially reported. But the underlying fundamentals continue to indicate the second half of 2019 should hold steady.
Consumer spending, the driver of US economic growth, has come in stronger than first reported. Its 4.7% rate of growth was the highest seen since the fourth quarter of 2014. Corporate profits for the second quarter grew 5.3%, a rebound after seeing declines of 3.8% in the first quarter of 2019 and 0.9% the last quarter of 2018. Government spending eased a bit in Q2 to 4.5%, versus 5% in Q1, but it’s still one of the strongest increases since June 2009. Government spending, over the next year or so, will help keep the economy going, hand in hand with the consumer.
The Fed’s ongoing easing of monetary policy might steepen the yield curve temporarily, but without an increase in inflation or a rise in economic activity, it’s expected the steepening will be short lived. Bloomberg Economics feels the likelihood of a recession through the end of 2020 is only 15%, despite the inverted yield curve.