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Slowdown in Business Spending - 8/11/16

Economists have had roughly two weeks to think about that disappointing report from the Commerce Department regarding second quarter gross domestic product.  Having had time to reflect, we remain disappointed.  According to the government, the U.S. economy expanded just one point two percent on an annualized basis during the second quarter. 

The growth estimate for the first quarter was revised downward to just zero point eight percent.  The most recent data mean that for the last nine months, the U.S. economy has been expanding at a roughly one percent pace.  Don’t blame this on consumers. 

Consumption increased by a rather strong four point two percent during the second quarter on an annualized basis.  Exports rose by one point four percent, and imports fell by zero point four percent.  So that wasn’t the problem either. 

The real problem is a sharp slowdown in business spending.  For instance, spending on building construction declined by nearly eight percent during the quarter, and equipment spending was down by nearly four percent.  Recent industrial production data are consistent with economic recession.   

Anirban Basu, Chariman Chief Executive Officer of Sage Policy Group (SPG), is one of the Mid-Atlantic region's leading economic consultants. Prior to founding SPG he was Chairman and CEO of Optimal Solutions Group, a company he co-founded and which continues to operate. Anirban has also served as Director of Applied Economics and Senior Economist for RESI, where he used his extensive knowledge of the Mid-Atlantic region to support numerous clients in their strategic decision-making processes. Clients have included the Maryland Department of Transportation, St. Paul Companies, Baltimore Symphony Orchestra Players Committee and the Martin O'Malley mayoral campaign.