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August 29, 2019 Blog 1 min read
The Commerce Department’s revision to Q2 GDP results were limited. Estimated growth slipped to 2%, supported by the largest quarterly increase in consumer spending growth in nearly five years.

8-29-19 GDP Chart

Revisions to the government’s estimate of GDP yielded little change in the report released by the Commerce department today. Top-line growth was revised fractionally lower to 2.0% from a previously reported 2.1%, a modest decrease that was in line with expectations.

On a positive note, consumer spending growth was revised upward to 4.7% from a previously reported 4.3% -- the strongest quarterly gain in nearly five years. The continued strength of the labor market and a relatively confident consumer sector fueled the bounce back after weak spending growth in Q1.

The upward revision in spending was offset by a number of other factors, including fractional reductions from a modestly stronger drawdown in inventories and a reduction in exports.

Global conditions have become more challenged in recent months as uncertainty around trade policy has risen and the rapidly approaching Brexit deadline approaches. The latter will likely have only tangential effects on the U.S. economy, although the escalating trade war with China will take a toll.

Even so, labor market conditions remain generally solid, with jobless claims of 215,000 last week indicating that layoffs remain low and employers remain sufficiently upbeat in the business outlook to maintain their current workforce.

Looking forward, a key question is whether or not the consumer sector can and will continue to carry the primary load for the economy, despite the storm clouds that continue to brew.

That may hinge in part on the looming Fed decision on interest rates at its mid-September policy meeting. Another cut wouldn’t likely be a market mover, as it is widely expected. A decision to hold steady would likely be met with disappointment.

For now though, the story remains one of an economy that is growing, but slowing. With policy risks and slowing global growth clouding the outlook and investors hoping that additional rate cuts will cut through that darkness and provide some illumination for a constructive path forward for the economy.

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