Second Quarter GDP Stronger Than Expected as Consumers Show Strength

Economy

Published: July 26, 2019 9:51 am

Last Updated: January 6, 2020 3:00 am

The Commerce Department reported on Friday that the domestic economy grew at a rate of 2.1% in the second quarter of 2019. The better-than-expected report on Gross Domestic Product (GDP) was better than the 2.0% consensus estimate published by the Wall Street Journal and was better than other consensus estimates of 1.9%.

With roughly 70% of GDP now coming from consumer spending of some sort, strong buying overcame weaker business investment. While the pace was slower than the first quarter’s 3.1% gain, nonresidential fixed investments fell by 0.6% in the second quarter after having risen by 4.4% in the first quarter.

Consumer spending’s gain was up 4.3% in the second quarter versus a 1.1% gain in the first quarter.

Underlying demand remained firm with sales to private domestic buyers up 3.2%. Government spending also added some juice to GDP, with growth of 5.0% on an annualized rate in the second quarter.

Current-dollar GDP increased 4.6%, or $239.1 billion, to a level of $21.34 trillion in the second quarter. In the first quarter, current-dollar GDP increased by 3.9%, or $201.0 billion. The price index for gross domestic purchases increased by 2.2% in the second quarter, after an increase of 0.8% in the first quarter.

While this GDP report was better than expected, it will get one revision in a month and a second revision in roughly two months. The GDP report may be stronger than expected, but it’s not weak enough nor strong enough to likely create any serious fear and panic for the markets on Friday ahead of next week’s decision on interest rates by the Federal Reserve.

The Dow and S&P 500 indexes were both indicated to open up 0.3% on Friday, while the yield on the 10-year Treasury note was up over 2 basis points at 2.075%.

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