U.S. Economy Grew Less-Than-Forecast 1.2% in Second Quarter
U.S. Economy Grew Less-Than-Forecast 1.2% in Second Quarter - Bloomberg
The U.S. economy expanded less than forecast in the second quarter after a weaker start to the year than previously estimated as companies slimmed down inventories and remained wary of investing amid shaky global demand.
Gross domestic product rose at a 1.2 percent annualized rate after a 0.8 percent advance the prior quarter, Commerce Department figures showed Friday in Washington. The median forecast of economists surveyed by Bloomberg called for a 2.5 percent second-quarter increase.
The report raises the risk to the outlook at a time Federal Reserve policy makers are looking for sustained improvement. While consumers were resilient last quarter, businesses were cautious -- cutting back on investment and aggressively reducing stockpiles amid weak global markets, heightened uncertainty and the lingering drag from a stronger dollar.
“We’re just muddling through," said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York, who had forecast a 1 percent gain in second-quarter GDP. “Consumer spending looks good, but the problem is that the rest of the economy is soft. The economy remains vulnerable to downside risks. The Fed is right to be cautious."
Private fixed investment, which includes residential and business spending, dropped at a 3.2 percent pace in the second quarter, the most in seven years.
With Friday’s report, the Commerce Department also issued its annual revisions, updating the data back through 2013. The first-quarter’s reading was revised from a previously reported 1.1 percent gain.
For a story on U.S. GDP revisions, click here.
The new breakdown shows a more pronounced slowdown in the economy heading into 2016. The year-over-year growth rate cooled from 3.3 percent in last year’s first quarter to 1.9 percent in the final three months of 2015, rather than the previous downshift from 2.9 percent to 2 percent.
The easing in growth continued into the first half of this year. The year-over-year pace for the first quarter of 2016 was revised down to 1.6 percent from 2.1 percent, the revisions showed. That revised trajectory has implications for Fed officials, as they’re faced with an expansion that has been steadily losing steam.
Friday’s report also showed that in the second quarter, GDP expanded at a 1.2 percent rate from the same period a year earlier.
Economists’ second-quarter estimates for GDP, or the value of all goods and services produced, ranged from 1 percent to 3.2 percent, according to a Bloomberg survey. The growth estimate is the first of three for the quarter, with the other releases scheduled for August and September when more information becomes available.
Inventories were reduced by $8.1 billion in the second quarter, the most since third quarter of 2011 and subtracting 1.16 percentage points from the economy. At the same time, leaner inventories could set the stage for a pickup in production later this year should demand hold up.
Household consumption, which accounts for about 70 percent of the economy, grew at a 4.2 percent annualized rate, the biggest jump since the end of 2014 and adding 2.83 percentage points to growth. That followed a revised 1.6 percent increase from January through March. The Bloomberg survey median forecast for the second quarter was 4.4 percent.
Business Spending
Corporate spending on equipment, structures and intellectual property, decreased an annualized 2.2 percent after a 3.4 percent fall in the first quarter. Outlays for equipment dropped for the fourth time in the past five quarters. Spending on structures -- everything from factories to shops to oil rigs -- have increased in just one quarter since the end of 2014.
Inventories and the trade gap are two of the most volatile components in GDP calculations. To get a better sense of demand in the U.S., economists look at final sales to domestic purchasers, or GDP excluding inventories and net exports. That measure increased 2.1 percent last quarter after a 1.2 percent gain.
Also holding back economic growth in the second quarter was a decrease in residential investment, which fell at a 6.1 percent pace. That was the most since the third quarter of 2010 and marked the first decrease in two years.
Government spending also shrank last quarter, declining 0.9 percent, the most in more than two years as outlays for the military fell. States and municipalities also cut back.
The GDP report also showed price pressures remain limited. A measure of inflation, which is tied to consumer spending and strips out food and energy costs, climbed at a 1.7 percent annualized pace compared with 2.1 percent in the prior quarter.
Fed policy makers, who left interest rates unchanged this week, said risks to the U.S. outlook have “diminished” and the labor market is getting tighter, suggesting conditions are turning more favorable for an increase in borrowing costs.
http://www.nationmultimedia.com/opinion/Remaking-US-foreign-policy-may-the-wisdom-of-
Remaking US foreign policy: may the wisdom of its forefathers prevail.
The Nation 26/8/59
There is no denying that the United States is the most powerful country on Earth, both militarily and economically.
According to the Stockholm International Peace Research Institute, last year the US spent $597 billion (2.3 per cent of GDP) on defence, nearly half of the world's total defence spending of $1,676 billion.
China came in second at $215 billion (3.3 per cent of GDP). More importantly, the US military is fighting in conflict zones around the world.
In its "2016 Report on Global Military Strength" Washington think-tank the Heritage Foundation ranks the US No 1, with both hardware and software that leaves main rivals Russia and China in the dust. The report, nonetheless, expressed concerns over its inherent weaknesses. It concluded that the current US military force is adequate to meet the demands of a single major regional conflict while also attending to various "presence and engagement" activities. But it cautioned that given the current "threat environment", the US is poorly equipped to handle two, simultaneous regional flare-ups.
That said, the fact that the US does possess unmatched war capabilities compels its politicians to repeatedly boast of the most powerful military in history - and the willingness to use it.
Also worthy of note is that the US is also easily the world's largest seller of arms, responsible for nearly 33 per cent of global exports.
Economically, meanwhile, America is also the undisputed superpower, with an $18-trillion economy that accounts for 24.5 per cent of the gross world product. The US economy also maintains advantage over others via its highly advanced technology, infrastructure and abundant natural resources. Despite the fact that the US has lost its lead to China in terms of GDP-based Purchasing Power Parity (PPP) - $19.4 trillion for China versus $17.95 trillion for the US, America is still far ahead in terms of GDP per capita (PPP) at about $55,805, versus China's $14,107.
However, in today's global situation of chaotic, intertwined and violent security narratives, military and economic power is no longer sufficient to win conflicts. And even if they do succeed, the result is hardly beneficial. As Bertrand Russell said, "War does not determine who is right - only who is left." In an age where too many countries have the nuclear capability to destroy our planet many times over, the next large conflict could see the end of us all.
Like it or loathe it, America is a global power with global interests. To retain that status it must use its military and economic power to navigate this highly intricate and multifaceted global security context. To do this it needs strategic guidance - better known as foreign policy.
Heavy-handed foreign policy uses military force to protect or bolster a country's status, or else economic force via sanctions and other means to force another country to change its behaviour. But victory in such cases has usually proved elusive and unsustainable. The "beggar thy neighbour" policy always backfires.
The US, however, does not lack shining examples of successful foreign policy that has helped navigate the country through challenging times.
When George Washington became president in 1789, six years after the Revolutionary War, the British were still trying to undermine US domestic security and international trade. Washington refused to react impulsively. When France launched the French Revolutionary Wars (1792-1797) against Britain, Austria and other European monarchies, the US conducted an adroit foreign policy to protect its own interests without getting involved in conflict. Washington, who had served more than 40 years in the army, regarded war as the worst tool of foreign policy. He argued forcefully that the "Great Rule" in conducting American foreign policy was "to maintain commercial partnerships without becoming involved in the politics of foreign lands".
Another military man-turned US president, Dwight D Eisenhower (1953-1961), steered America clear of contentious conflicts with Russia and China by upholding a foreign policy of peace and respect, in search of win-win solutions that didn't include diving up the pie equally.
A recent article in the National Interest by Daniel L Davis quoted Eisenhower's 1953 speech on foreign policy:
"No people on earth can be held, as a people, to be an enemy, for all humanity shares the common hunger for peace and fellowship and justice." Second, "No other country's security and well-being can be lastingly achieved in isolation but only in effective cooperation with fellow nations." And third, "Any nation's right to a form of government and an economic system of its own choosing is inalienable."
Hear that? A country has an "inalienable" right to choose its own form of government and economic system.
In these two presidents America had statesmen who possessed a prudent global view, and who would have steadfastly opposed the arrogant and self-righteous policy governed by a short-sighted and insular outlook that we have witnessed in recent times. Such policy has repeatedly proven to be counterproductive and detrimental to America's own interests. In its utter disrespect for other nations' autonomy, the US has alienated friends and allies, and is garnering increasing anti-American sentiment around the globe.
As America is poised to welcome its 45th president, let the world hope that the new US Commander-in-Chief heeds the wisdom of his/her nation's forefathers and overhauls its calamitous foreign policy of today.
Hear that? A country has an "inalienable" right to choose its own form of government and economic system.
If every US president since Eisenhower had lived by that the world would be a better and safer place today. And the US would be a better and more respected country.
