After contracting 0.5% in the first quarter, our economy as measured by gross domestic product, grew at an annualized rate of 3% between April and June. This exceeded the expectations of most economists who only expected it to grow 2.3%, as reported by the Wall Street Journal.
The growth rate of 3% is right where economists would like us to be. To borrow from an old nursery rhyme, it’s not too hot and not too cold.
It’s just right. But before you start popping open a well-aged bottle of bubbly, there’s a few things you ought to know.
1 – Consumer spending increased at a 1.4% rate, picking up from the first quarter as a steady labor market buoyed households’ spending power. But this was offset by businesses spending less.
2 – Imports plunged 30.3% after businesses front-loaded purchases in the first quarter.
3 – Exports fell at a 1.8% annualized rate.
4 – And inventories decreased significantly.
Let me leave you with this…
While consumers are spending like a sailor on leave, businesses are pulling back.
Growth in business investment went down, being limited by weaker investments in buildings and equipment. The housing sector, hard-hit by higher borrowing costs, remained a drag on the overall economy.
Today’s GDP report showed that prices, excluding volatile food and energy categories, rose at an annualized rate of 2.5% in the second quarter. This was slower than the first quarter but still above the Fed’s 2% target.
Federal Reserve officials have signaled that they’ll hold interest rates steady at their current policy meeting, which concludes later today. They’ve cited a solid economy and elevated inflation as reasons to keep rates on hold while they see how the new administration’s policies impact the economy.
But that’s the problem, isn’t it? What’s next? Whether the economy recesses or things keep chugging along is anyone’s guess at this point.
The White House has stated that it will impose retaliatory tariffs against any country that hasn’t signed a formal trade agreement this Friday. The only country being exempted from that currently is China, who’s deadline is now August 12th.
The uncertainty and caution in the marketplace is obviously a stance that we should all adopt. Just because everything is hunky dory today doesn’t mean that it will remain that way.
Be conservative in your spending. If there’s any fat in your organization, cut it now. Hold off on major investments. Horde your cash like a Viking King.
Scrutinize your monthly financial statements. They’re always important, but much more so in this transitory economy.
Do whatever is necessary to maintain your margins. When you have questions, you know my number.
We’re all going to get through this. Let’s get through it together.
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Payroll Services, or Accounting and Tax Work, you have but to ask. I’m here and I remain,
Sincerely yours,
Chris Amundson
President
Accounting Solutions Ltd.
773-267-7500
888-310-0300
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