US GDP shrinks while exports and spending surge

Ian Shepherdson, chief economist at pantheon macroeconomics, noted that U.S. workers' earnings also rose in Q2.

Ian Shepherdson, chief economist at pantheon macroeconomics, noted that U.S. workers’ earnings also rose in Q2.

This bodes well for continuing to revise the GDP growth forecast in a positive direction.

U.S. Q2 GDP fell 0.6 percent year-over-year, below the Commerce Department’s 0.9 percent contraction forecast in July.

According to U.S. government data released on Aug.


25, U.S. Gross Domestic Product (GDP) growth slowed in Q2 but remained lower than previous forecasts amid revised data showing stronger exports and spending.

U.S. Q2 GDP fell 0.6 percent year-over-year, below the Commerce Department’s 0.9 percent contraction forecast in July.

The U.S. government report said the upward revisions forecast in the most recent data mainly reflected the increase in exports and the reduction in spending less than expected by the federal government while consumer spending soared.

Notably, the increase in consumer spending reflects an increase in services, led by catering and accommodation.

After plummeting 1.6% in Q1, the updated GDP data still raises concerns about the risk of the US economy falling into recession – which is defined by negative growth for 2 consecutive quarters.

However, many economists argue that this definition of recession cannot be applied in the current situation because the strong recovery of the labor market coupled with the increase in purchasing power of American consumers means that the recession is not widespread throughout the economy.