The Commerce Department reports that the annualized increase in gross domestic product -- the broad measure of all goods produced in the U.S. -- came in at 1.6 percent. This is pretty anemic for a recovery, but a tick more than the 1.4 percent forecasters expected. (This is the second of three estimates of second-quarter growth the government will release; it could be revised up or down.)
The trade deficit played a part in producing this limited expansion, with imports hitting a 26-year peak in June (anything we import instead of making in the U.S. represents a net drop in GDP). Inventory replacement also continued to slow this quarter as businesses have little incentive to expand their stock of goods; much of the shortfall was made up by government spending and "nonresidential fixed investment" -- basically, purchases of business-related structures and equipment.
You can see the decelerating recovery from the graph above; post-recession GDP growth peaked at 5.7 percent in the last quarter of 2009 -- a high made up largely of inventory replacement as businesses replaced stock they had allowed to dwindle during the economic downturn. Now, though, growth remains anemic, which is especially worrying given that the stimulus is 70 percent spent and little further action is likely to come from either Congress or the Federal Reserve to move the economy forward. While forecasters are projecting a relatively low chance of a double-dip recession, you wonder whom to believe -- them, or your lying eyes.
-- Tim Fernholz
