Second quarter GDP growth below estimates
The U.S. economy grew at a disappointing rate in the
second quarter, the U.S. Department of Commerce
reported in a sign that the U.S. continues to rebound from
the damage of the Covid-19 pandemic but still has more
work to do.
Gross domestic product, a measure of all goods and
services produced during the April-to-June period,
accelerated 6.5% on an annualized basis. That was slightly
better than the 6.3% gain in the first quarter, which was
revised down narrowly.
While in the years prior to the pandemic, the Q2
improvement would have been the strongest since the third
quarter of 2003, the gain was considerably less than the
8.4% Dow Jones estimate.
Gross private domestic investment fell 3.5% as declines in
private inventory and residential investment held back
gains. Rising imports and a 5% decline in the rate of
federal government spending, despite the ballooning
budget deficit, also were factors, the Bureau of Economic
Analysis report said.
The overall increase came thanks to increasing personal
expenditures, which rose 11.8% as consumers accounted
for 69% of all activity. Nonresidential fixed investment,
exports and state and local government spending also
helped boost output.
Homebuilding stumbles amid supply constraints
Homebuilding fell more than expected in July, the latest
sign that surging construction costs and home prices
continued to constrain the housing market early in the
third quarter of the year.
The Department of Commerce reported that housing starts
dropped 7.0% to a seasonally adjusted annual rate of 1.534
million units last month. Data for June was revised up to a
rate of 1.650 million units from the previously reported
1.643 million units. Economists polled by Reuters had
forecast starts would fall to a rate of 1.600 million units.
Homebuilding fell in the Northeast, Midwest, and West,
but rose in the populous South. Starts increased 2.5% on a
year-on-year basis in July. Single-family starts, which
account for the largest share of the housing market, fell
4.5% to a rate of 1.111 million units.
Though the report showed a rebound in building permits
after three straight monthly declines, the gain was in the
volatile multi-family home segment, which will do little to
ease an acute housing shortage that is driving up prices.
The number of houses authorised for construction but not
yet started last month was the third highest on record,
indicating builders remained hesitant to undertake new
The report followed on the heels of a survey from the
National Association of Home Builders showing
confidence among single-family homebuilders dropped to
a 13-month low in August because of higher material costs
and home prices, which are cooling demand for houses.
Housing starts also cooled in Canada. The stand alone
monthly SAAR of housing starts for all areas in Canada
was 272,176 units in July, a decrease of 3.2% from June.
While the market has moderated in total starts from the
highs recorded earlier this year, the level of activity
remains elevated by historical standards.
Home sales gain in July
Home sales rose for the second straight month but were
barely higher than in July 2020. Sales of existing homes in
July rose 2% from June to a seasonally adjusted,
annualized rate of 5.99 million units, according to the
National Association of Realtors.
Sales were 1.5% higher than July 2020, continuing a trend
of gains following a pullback in the spring. Sales are likely
improving due to rising supply. The inventory of homes at
the end of July stood at 1.32 million, down 12% from a
year ago, but that is a smaller annual decline than in recent
months. Despite the slight increase in supply, demand
continued to outpace it, pushing prices to another all-time
Existing-home sales in the Northeast remained steady in
July, registering an annual rate of 740,000 for the second
straight month, a 12.1% rise from July 2020.
Existing-home sales in the Midwest rose 3.8% to an
annual rate of 1,380,000 in July, a 1.4% decline from a
year ago. Existing-home sales in the South rose 1.2% in
July, recording an annual rate of 2,630,000, up 1.2% from
the same time one year ago. Existing-home sales in the
West grew 3.3%, posting an annual rate of 1,240,000 in
July, equal to the level of a year ago.
Consumer sentiment plunges to lowest since 2011
Consumer sentiment fell in early August to the lowest
level in nearly a decade as Americans grew more
concerned about the economy¡¯s prospects, inflation, and
the recent surge in coronavirus cases.
The University of Michigan¡¯s preliminary sentiment index
fell by 11 points to 70.2, the lowest since December 2011.
The figure fell well short of all estimates in a Bloomberg
survey of economists.
The slump in confidence risks a more pronounced slowing
in economic growth in coming months should consumers
rein in spending.
The recent deterioration in sentiment highlights how rising
prices and concerns about the delta variant¡¯s potential
impact on the economy are weighing on Americans.
Manufacturing growth slowed in July
Manufacturing activity grew at a slower pace in July for
the second straight month as raw material shortages
persisted, though there are signs of some easing in supplychain
The survey from the Institute for Supply Management
(ISM) showed a measure of prices paid by manufactures
fell by the most in 16 months, while the supplier deliveries
index retreated further from a 47-year high touched in
May. Part of the decline could be because spending is
rotating back to services from goods.
"Manufacturing is slowing from unsustainable boom to
sustainable strength," said Chris Low, chief economist at
FHN Financial in New York.
The ISM¡¯s July index of national factory activity fell to
59.5 last month, the lowest reading since January, from
60.6 in June. A reading about 50 indicates expansion in
manufacturing. Seventeen of 18 manufacturing industries
reported growth in July as Furniture and Related Products
reported the strongest growth while Wood Products
reported only slight growth for the month. Only textile
mills reported a decline.
IWPA announces new Executive Director
The International Wood Products Association has named
Bradley McKinney as the organisation¡¯s new Executive
Director. McKinney is the former Vice President of
Economic Security and Operations for the Export-Import
Bank of the United States.
McKinney also served as Chief of Staff for the
International Trade Administration at the U.S. Department
of Commerce. He has also provided legislative and
regulatory affairs services on a range of international
trade, agriculture and manufacturing issues while on staff
at the National Association of State Departments of
Agriculture and two private consulting firms.
McKinney assumes the role in September, following the
departure of Cindy Squires who left IWPA in July to
become President and CEO of the American Composites