I remain impressed by how well the US economy is doing despite all the meddling from federal, state, and local governments. Consider the following:
(1) GDP cruising at stall speed. Real GDP growth on a year-over-year basis has been hovering around 2% since Q2-2010. It was 2.3% during Q2. Along the way, “endgamers” warned that 2% has been the economy’s stall speed in the past. Whenever it fell below that rate, a recession followed. So far, it has been different this time. That may be because the private sector has been growing around 3% over the same period, measured by real GDP excluding government spending.
(2) Consumers still consuming. Consumer spending in real GDP rose 3.1% y/y during Q2. That’s among the highest growth rates during the current economic expansion! Real consumer spending per household rose to a record $96,240 during May, up 2.2% y/y. Household formation has recently been growing at a faster pace. That certainly augurs well for consumer spending. So does the strength in employment indicators. On the other hand, wage gains remain lackluster, as discussed below, though they are outpacing price inflation.
(3) Capital spending not all bad. Capital spending in real GDP rose just 2.6% y/y during Q2, one of the weakest growth rates during the current expansion. Such spending on business structures fell 1.7% y/y. On the other hand, equipment spending increased by 2.1%, and intellectual property products rose 6.6%.
The good news is that while total real capital spending has stalled over the past three quarters, it has done so at an all-time record high exceeding $2.2 trillion (saar). Industrial equipment spending rose to a record high during Q2, while transportation equipment spending remained near recent record highs, which well exceed the previous cyclical peak. The sum of real capital spending on information processing equipment, software, and R&D rose to a record high of $942 trillion (saar) during Q1, and held around that level during Q2, up 3.9% y/y.
Today's Morning Briefing: A World of Hurt? (1) Bronx and Brooklyn cheers. (2) Jared Bernstein to the rescue. (3) Krugman is a man for all seasons. (4) Keynesians are never wrong. (5) Straying from the path. (6) White House shocked that so many jobs require a license. (7) GDP still growing at stall speed. (8) Households are doing well and forming at a faster clip. (9) Some good news under the hood for capital spending. (10) More renters seeking shelter. (11) Nine factors weighing on wages. (12) Global economy continues to stagnate. (13) China’s big snow job. (14) “Mission Impossible--Rogue Nation” (+).
