GDP Data Shows Consumers Culling Spending
NEW YORK (TheStreet) -- A slowdown in consumer spending was among the more troubling aspects of Friday's disappointing read on second quarter GDP growth.
According to the Commerce Department, second-quarter GDP grew 1.3%, falling short of the 1.6% consensus estimate and the 2.1% reading expected by Briefing.com.
Coupled with first quarter GDP growth of 0.4%, the latest numbers confirm economists' belief that the economic recovery slowed significantly in the first half of the year. The government had originally estimated that first quarter GDP grew at 1.9%, but slashed that estimate to 0.4% on new inflation data.
The second quarter increase in real GDP was due to gains in exports, federal government spending, and private investments. A drop in personal consumption, however, proved a serious drag on the overall number.Growth in personal consumption, adjusted for inflation, tapered off to a meager 0.1% in the second quarter from 2.1% in the first quarter. That puts second quarter consumer spending at a two-year low and it's likely to make the Federal Reserve a bit nervous. The private sector, as opposed to the government, is important in determining how the economic recovery will ultimately shape up, according to Drew Matus, an economist at UBS. If Americans aren't spending as much, then they're likely still worried about jobs, inflation and the overall economic picture.
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