Comment on Q2 GDP; Kathy Bostjancic, Director for Macroeconomic Analysis, The Conference Board

Q2 GDP: ECONOMY SLOWLY GAINING STRENGTH

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Jul 31, 2013, 09:04 ET

NEW YORK, July 31, 2013 /PRNewswire/ -- The U.S. Bureau of Economic Analysis today reported 1.7 percent annualized growth in real gross domestic product for the second quarter of 2013.

Economic growth remained slow in the second quarter as consumer spending cooled and cuts in federal government spending weighed on economic activity. However, the U.S. private domestic sector continues to exhibit underlying strength and improved health following several years of major structural adjustments. This improved strength appears to be offsetting the fiscal drag and is poised to get stronger in the second half of the year. Leading the way, the housing and labor markets continue to gather momentum. So, consumer confidence and spending should strengthen in the third and fourth quarters. In turn, that could be the key to getting business to green light some long delayed investment plans. All in all, after several years of slow growth, the economy is finally poised to come back to a more robust growth path. If it does, it holds the promise to stay there next year. However, to achieve the improved GDP forecasts in the second half of this year, productivity growth must improve from its currently slow pace. While we continue to see signs that the private sector can overcome the fiscal drag, this assumes there is no large acrimonious budget impasse at the end of the year which could once again damage consumer and business confidence, or even worse, threaten stability in the global financial markets if policy makers again seriously threaten not to raise the debt ceiling limit. Thus, dysfunctional government in Washington continues to represent a large downside risk for the outlook for the U.S. economy.

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