“Despite the fact that the headlines for today’s GDP report seem awful, there is actually a significant amount of decent news buried in the data,” said Associated Builders and Contractors (ABC) Chief Economist Anirban Basu. “Much of the slowdown in economic growth is due to a deceleration in consumer spending, but other aspects of the economy, including exports, investment in structures and investment in equipment and software expanded robustly during the second quarter.
“Consumption slowed predictably largely because of higher food and energy prices. The question was whether businesses would follow the path laid down by consumers or continue to remain in expansion mode. The answer is that businesses continued to position themselves for growth opportunities,” Basu said.
“Sadly, corporate momentum and confidence may not last,” said Basu. “Given the ongoing shakiness among consumers in light of high and rising unemployment, and lingering uncertainty in Washington, inventory investment is unlikely to pick up significantly in the near-term. That will lead to weakness in orders and production.
“Likewise, economic activity during the second half of 2011 is positioned to be weaker than it would have been but for the ongoing stalemate in Washington, D.C. This will likely translate into less robust business investment, including in structures,” Basu said. “The bottom line is that the recovery in nonresidential construction has been further postponed.”