Cashstrapped Consumer or the Belt Tightening Corp America? Who’s driving down the GDP numbers?
So, the question in our minds after this morning’s disappointing GDP numbers is, who is right? The consumer expanding their spend rate, or companies contracting their investments?
The reality is that we see the consumer chasing the “always on sale” deals — just look at last night’s Amazon (AMZN) results — but doing so in a “thrifty” way. Amazon.com, COSTCO, Walmart — these is where the spending is taking place, along with others in our Guilty Pleasures theme.
On the other hand, corporate America is looking at tighter profit margins, higher overhead costs and both a weakening global economy and political uncertainly here on our shores.
Not a good combination for most companies, with the exception of those with heavy weighting in our Connected Society and Cashstrapped Consumer thematics in our Thematic Index, which rose 10.36% and 8.12% respectively in the first half of the year. More details to come when we release our first Thematic Index Report in the coming days.
In the second quarter, consumer spending rose strongly. Personal consumption, which accounts for more than two-thirds of economic output, expanded at a 4.2% rate, the best gain since late 2014. Outlays on goods advanced 6.8%. Spending on services climbed 3%.But nonresidential fixed investment, a measure of business spending, declined at a 2.2% pace, the third straight quarterly drop. Companies spent less on buildings and equipment.
Firms also pared back inventories sharply. The change in private inventories subtracted 1.16 percentage points from overall growth. That was the category’s fifth-straight decline and the largest drag from inventories in two years.
Source: U.S. GDP Grew a Disappointing 1.2% in Second Quarter – WSJ
