A downward revision to gross domestic product (GDP) growth in the second quarter, along with declines in new vehicle sales and falling consumer confidence, are but the latest signs that the U.S. economy remains sluggish.
The Commerce Dept.’s Bureau of Economic Analysis (BEA) recently revised GDP growth downward for second quarter this year from 1.3% to 1%. That follows a similar revision by the BEA for the first quarter, which saw initial estimates of 1.9% GDP growth fall to 0.4%.
“GDP revisions are unavoidable, because the earliest estimates – while important for making policy decisions, especially if the economy is beginning to head in the wrong direction – are not made with complete information,” noted Mark Doms, chief economist for the Commerce Dept.
“The U.S. economy is made up of more than 6 million employer businesses that span thousands of industries,” he added. “Keeping track of what is happening in real time is a daunting challenge, especially as we try not to overburden the business community with information.”
A sharp decline in the pace of new-vehicle retail sales this August reflects the broader economic slowdown in the U.S.
Data tracked by J.D. Power & Associates indicated that the pace of new-vehicle retail sales declined sharply during the second half of August as the impact of negative variables—weak consumer confidence, delayed purchases in the hopes of bargains, and inclement weather—took hold.
The August retail seasonally adjusted annualized rate (SAAR) is expected to come in at 9.7 million units, which is an improvement from July’s 9.5 million unit rate. However, the total light-vehicle selling rate is expected to drop down to 11.9 million units from July’s 12.2 million units as a result of a weaker fleet mix.
“With the economic woes, summer vacations and Hurricane Irene taking center stage, August may be a lost month for vehicle sales,” noted Jeff Schuster, executive director of global forecasting at J.D. Power. “But the slight increase in the retail selling rate from last month is still a step in the right direction.”
Consumer confidence is also on the downswing. According to the Conference Board, its Consumer Confidence Index, which had improved slightly in July to 59.2, plummeted in August to 44.5.
“Consumer confidence deteriorated sharply in August, as consumers grew significantly more pessimistic about the short-term outlook,” noted Lynn Franco, director of the Conference Board’s Consumer Research Center. “The index is now at its lowest level in more than two years, since April 2009, when it reached 40.8.”
Consumers’ appraisal of present-day conditions weakened further in August, she added. Consumers claiming business conditions are “bad” increased to 40.6% from 38.7%, while pessimism increased concerning employment conditions, with those claiming jobs are “hard to get” increasing to 49.1% from 44.8%, while those stating jobs are “plentiful” declining to 4.7% from 5.1%.
Those consumers expecting business conditions to improve over the next six months decreased to 11.8% from 17.9%, Franco noted, while those expecting business conditions to worsen surged to 24.6% from 16.1%.