The U.S. economy grew much slower than previously thought in the second quarter as business inventories and exports were less robust, a government report showed on Friday, although consumer spending was revised up.
TOM PORCELLI, U.S. ECONOMIST, RBC CAPITAL MARKETS, NEW YORK
It doesn't change much for us from a fundamental perspective. The consumer still barely had a pulse in the second quarter.
The bulk of the revision was based on downward revisions to inventories and trade.
The market here is so focused on ten o'clock, we've put this data in our rearview mirror.
PAUL BALLEW, SENIOR VICE PRESIDENT AND CHIEF ECONOMIST AT NATIONWIDE INSURANCE IN COLUMBUS, OHIO
It's right in line with what we expected and the stall we saw in the first half of the year. We were expecting a bit of a downward revision, which reflects the headwinds on the recovery and all the factors we're trying to wrestle to the ground. Two years into the recovery we're still trying to get to pre-recovery levels.
We're expecting that things will be marginally stronger in the last part of the year...The question is are we looking at a fourth quarter recovery?
SEAN INCREMONA, ECONOMIST, 4CAST LTD, NEW YORK:
The headline number is disappointing. You don't want to see these numbers revised downward. You had an upward revision in consumer spending, which goes along with that retail sales number we saw earlier this month, and business investment came up a bit, so those two are the positive aspects to the report. Net exports and inventories look like where the brunt of the downward revision came from. Overall it was still in line with this very soft recovery so you are not going to take much optimism out of these numbers.
WILLIAM LARKIN, PORTFOLIO MANAGER WITH CABOT MONEY MANAGEMENT IN SALEM, MASS
GDP was in the gray area. It was ugly, but not a disaster. Had it been under 1 percent we'd have more of a psychological reaction, but it was too close to expectations to move the market ahead of Bernanke. It's in the neutral zone. Now the attention turns to Jackson Hole.
VIMOMBI NHSOM, ECONOMIST, IFR ECONOMICS, A UNIT OF THOMSON REUTERS
Revisions have estimated that the amount of goods and services produced in Q2 grew at annualized pace of 1% from Q1, down from earlier Q2 GDP growth estimate of 1.3%. The downward revision of 0.3% was more or less aligned with market consensus, which assumed that the impact of a widened trade deficit and inventory drag would pull growth down to 1.1%. Upwards revisions from sources like consumer spending (entirely services) and investments (nonresidential and equipment/software) helped to negate the magnitude of the smaller growth estimate. Consumer spending contributed more to GDP than previously thought (0.3 percentage points), having risen 0.4% in Q2. Although better than the first estimate of 0.1%, spending is not even a fifth of Q1's growth (2.1%) which shows just how deep the temporary Q2 headwinds curtailed buying power and appetite (revisions to DPI report Q2 growth of 1%, which is a slowing of 1.2% in Q1).