The U.S. economy has gone ten years, 2006-2015, without a single year of 3 percent economic growth. This streak is probably unprecedented in American history. The previous post-war record was just four consecutive years (1979-1982) of sub-3% growth. On Friday, the Commerce Department reported that the U.S. is now well on its way to making it 11 years in a row.
The U.S. economy expanded less than forecast in the second quarter after a weaker start to the year than previously estimated as companies slimmed down inventories and remained wary of investing amid shaky global demand.
Gross domestic product rose at a 1.2 percent annualized rate after a 0.8 percent advance the prior quarter, Commerce Department figures showed Friday in Washington. The median forecast of economists surveyed by Bloomberg called for a 2.5 percent second-quarter increase.
The 0.8 percent figure for the first quarter represented a downward revision from an initial estimate of 1.1 percent. For the first half of 2016, therefore, growth has averaged a rate of just 1.0 percent. As a result, the economy can avoid an 11th straight year of sub-3% growth only by growing at a rate of at least 5.0 over the second half of the year. That seems a pretty tall order, since each of the past seven quarters have now seen growth rates below 3.0.
Furthermore, growth during the final quarter of 2015 came in at a rate of only 0.9. Hence the economy has grown at a rate of only about one percent over the last three quarters.
As we reported previously, however, some economists think that official figures underestimate the true rate of growth by as much as 0.7 percentage points. Even so, adjusting for this discrepancy would still put growth over the last three quarters at about a 1.7 percent rate, which is weak. By U.S. historical standards, 3 percent growth would be moderate, and 4 percent good.
The other disturbing aspect of Friday’s report was the drop in business fixed investment.
Private fixed investment, which includes residential and business spending, dropped at a 3.2 percent pace in the second quarter, the most in seven years.
Seven years, in other words, since the last recession.
Corporate spending on equipment, structures and intellectual property, decreased an annualized 2.2 percent after a 3.4 percent fall in the first quarter. Outlays for equipment dropped for the fourth time in the past five quarters. Spending on structures — everything from factories to shops to oil rigs — have increased in just one quarter since the end of 2014.
Declining business investment usually presages a recession.