Aug 26, 2016
Slowest Second Quarter Growth in Three Years (Q2 Preliminary Estimate)
Post by Derek Yale
Today, the U.S. Department of Commerce released its second estimate of gross domestic product for the second quarter of 2016, announcing that the U.S. economy expanded at an annual rate of 1.1 percent, up from 0.8 percent during the first quarter, and revised down 0.1 percent from the advance estimate reported last month. This is the second of three reports for second quarter GDP and further points to the continued slowdown of the economy, which began during the last six months of 2015. This report confirms that government spending does not spur economic growth, and we observe yet another quarter of anemic growth as hardworking Americans struggle with stagnant income. This slow pace means most families aren’t feeling any meaningful improvements and, barring an unlikely burst of growth in Obama’s final year, he will have presided over slower annual growth than any president since Eisenhower.
Slow Second Quarter Growth: The economy grew 1.1 percent during the second quarter of 2016, 1.4 percentage points slower than the same period last year. This is the slowest second quarter growth since 2013 when the economy grew at an annualized quarterly rate of 0.8 percent. In addition, this year’s second quarter growth rate is 0.8 percentage points slower than the average second quarter growth observed over the past eight years.
Annual Growth Under President Obama: During the eight years under President Obama, annual growth has averaged a sluggish 1.4 percent. This includes the second quarter annualized growth rate for 2016 of 1.1 percent. Annual growth under President Obama has been the slowest of any administration since President Eisenhower.
Falling Household Income: Slow growth over the past seven years has had a real impact on the livelihoods of working Americans. According to the Census Bureau’s most recent data, inflation-adjusted median household income in the U.S. fell from $55,313 in 2008 to $53,657 in 2014.
Post-Recession Growth Rate: From 2010 to 2016, the economy averaged a mere 2 percent quarterly growth rate. This is significantly lower than the 3.5 percent average rate of growth in the same timespan after the last three recessions.
Pre-Recession Growth Rate: From 1946 to 2007, the U.S. economy expanded at an average quarterly rate of 3.5 percent, significantly higher than the growth rate observed during the current post-recession expansion.
Falling Business And Residential Investment: Private fixed investment, which incorporates business and residential spending, fell by 2.5 percent during the second quarter of 2016. This is down from a 0.9 percent contraction observed during the first quarter and the most dramatic slowdown seen in almost seven years when investment fell by 2.8 percent. Spending on business structures and equipment contributed to this contraction, falling at 8.4 percent and 3.7 percent rates, respectively, while residential spending contracted by 7.7 percent. This contraction represents the slowest rate observed since the third quarter of 2010 when residential spending contracted by 30.7 percent.
Consumer Spending Growth: Consumer spending, which accounts for roughly 70 percent of U.S. economic activity, grew at an annual rate of 4.4 percent during the during the second quarter of 2016. Overall, consumer spending is up from the 1.6 percent increase observed during the first quarter of 2016, as well as up 2.1 percentage points from the rate seen during the fourth quarter of 2016.