GDP growth sputters in Q2

October 01, 2002 |

Economic recovery appeared to be in the process of stalling out at mid-year. According to estimates from the Commerce Department, gross domestic product (GDP) increased at an annualized rate of just 1.1% during the second quarter. This was far weaker than the 5% growth recorded during the first quarter of 2002. In anticipation of better days ahead, manufacturers and retailers continued to build inventories from recently depleted levels during the second quarter. After contributing 2.6% to first quarter 2002 GDP — more than half of the quarter's 5% overall increase — inventory investment accounted for all of the net gain in second-quarter GDP. With inventories adding 1.2% to the second quarter's activity, the value of final sales of goods actually declined by 0.1%.

Consumer spending increased at a much slower rate (1.9%) during April-June of this year than over the previous six months (4.5%). And business capital spending contracted for the seventh consecutive quarter. But continued strong growth in home building, exports, and federal government spending have kept the economy afloat and the economic recovery on track, if only just barely.

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