GDP growth driven primarily by consumer spending – Wells Fargo

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Data released on Thursday showed GPD grew at an annualized rate of 6.6% during the second quarter, revised from 6.5% and below the 6.7% expected.  The data continue to show that consumer spending was the primary driver of overall GDP growth in Q2, with business fixed investment spending also making a positive contribution to the topline growth rate, explained analysts at Wells Fargo.

Key Quotes: 

“The data continue to show that GDP growth was driven primarily by consumer spending, although business fixed investment spending also made a positive contribution to topline GDP growth.”

“De-stocking sliced 1.3 percentage points from the topline GDP growth rate. Inventories should support GDP growth in coming quarters as businesses look to rebuild depleted inventories.”

“Real income grew only 1.6% (annualized) in Q2 due, at least in part, to fewer fiscal transfers. The shortfall of real income growth from GDP growth in the second quarter suggests that the latter could be revised lower in the future.”

“Corporate profits surged 9.2% (not annualized) to a record high in the second quarter. The strength in profits reflects widening margins in conjunction with strong demand.
Wide profit margins suggest that businesses may have the ability to avoid passing on all cost increases to customers in the form of higher prices.”

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