The advance release of second quarter Gross Domestic Product showed that the U.S. economy grew less than expected. Even though the headline number was not great, one of the important underlying components paints a slightly more optimistic picture. Let’s take a closer look.
The components of Gross Domestic Product (GDP) are: consumer spending, government spending, business investment, and net exports (exports – imports). Each country will vary in which component drives growth more than the other ones. For the U.S. economy, it’s the consumer that drives growth. In fact, it makes up over two-thirds of GDP. So when consumers are still spending and remain confident about the economy, it is a sign that growth potential is still present.
The U.S. economy grew at a 1.2% annualized pace in the second quarter. While growth was lower than expected, the consumer spending component of GDP was strong. Household purchases increased 4.2% in the period and overall the quarter was the strongest three months for spending since the late 2014.
This illustrates that the consumer is helping to keep the U.S. economy on its slow but steady path of growth. With an improving labor market, wages slowly starting to rise, and consumer spending still intact, the U.S. economy should continue to grow at a moderate pace in the second half of 2016. If you would like to know more about how this will impact your investments in the future, please give us a call or stop by. For over 134 years, Security National Bank has helped people manage their money and make it work to help them achieve their objectives.
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