National Association of Federal Credit Unions (NAFCU) Chief Economist Curt Long issued the following statement today in response to the Commerce Department’s first reading of second-quarter date on gross domestic product (GDP).
“The latest GDP report highlights the growing divide between consumer sentiment – which remains buoyant in light of a strong stock market, surging real estate values and cheap gas – and business confidence,” said Long. “The chief drag on the economy continues to be a dearth of business investment, which in the second quarter included a large downsizing of inventories. But households are continuing to spend, and at the moment that is providing enough momentum to ward off a recession. The fact that residential housing subtracted from the overall tally is a bit of a mystery as housing starts have been strong lately, and there could be a positive revision forthcoming.
“As for the Fed, this report makes a September rate hike less likely as the working margins continue to thin and the specter of a recession looms. Inflation strengthened during the quarter but remains below the Fed’s target.”