Thursday, July 30, 2015

"Economists React to Second-Quarter GDP: ‘By No Means Satisfying’"

From Real Time Economics:
U.S. gross domestic product,  the broadest sum of goods and services produced across the economy, grew by a seasonally adjusted annual rate of 2.3 percent in the second quarter of 2015, the Commerce Department said on Thursday. Here’s what economists had to say:

The mixing and matching of what drives GDP growth has shifted to consumption and housing, what the Fed was indicating yesterday. Overall growth is certainly strong enough and steady enough, despite the lack of any upside dynamics, to suggest the real cost of short-term money should be more than zero. The [Federal Open Market Committee] increasingly agrees from our read and, after all, they only want to raise the funds rate to 25 basis points from 12.5 basis points and then think about it the next move.” –Steven Blitz, ITG

“Second-quarter growth was powered by strong vehicle demand. But households bought nondurable goods and spent a fair amount on services. In contrast, business investment declined. Much of that came from a drop in equipment spending, which is probably the oil-patch retrenchment….The federal government continues to do whatever it can to kill the economy but at least state and local governments are spending again. There was a new measure created that reflects private domestic demand as it excludes trade, inventories and government spending. It rose solidly. This will be watched closely as it relates to what is happening in the domestic economy.” –Joel Naroff, Naroff Economic Advisors

Spending on intellectual property products grew at an annual rate of 5.5% in the second quarter, continuing a nice string of advances which offers some hope for improved productivity growth in future quarters.…The bottom line is slow productivity growth remains an issue which must be dealt with but first has to be more fully understood than it now is. All in all, today’s report doesn’t alter the broader view of the U.S. economy, with growth still in the steady though by no means satisfying range that has persisted since the end of the 2007-09 recession.” –Richard Moody, Regions Financial Corp.

“Final sales to private domestic purchasers, which is one of our favorite measures of underlying demand, increased 2.5% in the second quarter compared to 2.0% in the prior quarter. However, this is below the 3.2% annual average for 2014, and inventories were much larger than expected ($110 billion vs. $113 billion and a trailing three-year average of around $60 billion). However, we are not changing our estimate of 3.0% current-quarter real GDP in part because the residual seasonality that has been seen in a weak first quarter has tended to result in a stronger third quarter. Moreover, we expect robust consumer spending this quarter.” –Joseph LaVorgna, Deutsche Bank