The U.S. economy grew at a stronger than expected 2.8% annualized rate in the second quarter. The growth rate for the quarter that ended in June was double the 1.4% rate in the first quarter. Consumer spending and business investments drove almost all of the second quarter’s growth.
But below the top line numbers I can see a slowdown in some fundamental trends from the first quarter. Current-dollar personal income increased $237.6 billion in the second quarter, compared with an increase of $396.8 billion in the first quarter. Disposable personal income increased $186.3 billion, or 3.6%, in the second quarter, compared with an increase of $240.2 billion, or 4.8%, in the first quarter. Real disposable personal income increased 1.0%, compared with an increase of 1.3% in the first quarter. Personal saving was $720.5 billion in the second quarter, compared with $777.3 billion in the first quarter. The personal saving rate—personal saving as a percentage of disposable personal income was 3.5% in the second quarter, compared with 3.8% in the first quarter.
Those slight slowdowns suggest that the economy will have trouble matching the second quarter growth rate in the third quarter that ends in September. Remember that the unemployment rate has edged higher for three straight months. The Atlanta Federal Reserve Bank will publish its first projection for third quarter GDP growth on Friday, July 26.
Remeber that the stock market prices anticipate the future rather than reflect the past. Today the Dow Jones Industrial Average rose 0.20% but the Standard & Poor’s 500 and the NASDAQ Composite fell 0.51% and 0.93%, respectively. The small-cap Russell 2000 gained 1.26%.
