On Friday (26 July 2019), the US GDP figures were released for Q2 2019. GDP for Q2 2019 shows that the US economy grew at an annual rate of 2.1 per cent, down from Q1 2019 of 3.1 per cent annual growth. This result was slightly above market expectations (Dow Jones estimates), with the market estimating 2.0 per cent annual growth for Q2 2019.
Consumer spending growth was stronger than expected with 4.3 per cent annual growth, while the estimate was 4.0 per cent. As consumer spending accounts for two-thirds of economic activity, this is a very positive result for the US economy. The main reason for the strong increase in consumption growth was the Trump tax cut, which allowed for further growth in consumer spending.
The main disappointment from the Q2 results is that private business investment dropped 5.5 per cent in Q2 compared with Q1. This is mainly due to weak private investment into infrastructure. Another reason for the slump in investment is continued concerns in the business world surrounding the back and forth nature of the US and China trade war.
Overall, in the last decade, the US economy has seen one of the longest periods of continued US expansion in history. However, this expansion has been relatively weak, with GDP fluctuating around 2.5 per cent growth.
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