United States: inventory levels weigh heavily on GDP


Second-quarter US GDP growth has come in below expectations at 1.2%. The release of a new statistical report by the Census Bureau had given advance warning that figures may be worse than expected, due in particular to the inventory component. This is indeed a key factor in explaining much of the disappointment, as it has subtracted 1.2% from GDP. In the last five quarters, falling inventory levels have cost 0.6 growth points on average. Another factor that has been weighing on growth for several quarters is the collapse in mining investment which has subtracted 0.3 points. In terms of positives, consumer spending was very healthy in the second quarter.

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As is the case every year when July’s growth estimates are released, adjustments have been made on historical data to include more reliable figures which take longer to obtain. In 2013 and 2015, growth was stronger by 0.2 points in the end, standing at 2.6% last year. Furthermore, adjustments mitigated the significant residual seasonality that had appeared.

Overall, this year’s second-quarter estimate seems to confirm that we have experienced a mid-cycle slowdown, similar to those observed in 1986 or 1996, and marked by a significant inventory correction. Growth should therefore continue to gain pace.

The opinion expressed above is dated July 29th, 2016 and is liable to change.

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