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The Department of Commerce said the Gross Domestic Product (GDP) increased at an annual rate of 1.9% in the second quarter, an improvement from the pace of growth in the prior two quarters. “Consumer spending accelerated modestly in the second quarter growing by 1.5%, thanks in large measure to well-timed fiscal stimulus which should also help prop up consumer spending in third quarter as well,” Huether says. “Without the stimulus, consumer spending would likely have been flat due to the negative effects of rising energy prices.”
The Commerce report said residential investment continued to decline at a double-digit rate in the second quarter, falling by 15.6%. “This was a milder decline than during the prior three quarters, suggesting that the worst of the housing recession may be behind us,” Huether says.
“The real story in today’s report is that the 9.2% rise in exports more than offset the offset the downturn in housing,” Huether says. “In fact, exports alone accounted for 61% of economic growth in the second quarter, and over the past year, fully two-thirds of GDP growth has come from U.S. exports, 63% of which are manufactured products.
“While the trade balance, as a share of GDP edged up to 5.2% of GDP, this was entirely due to the rise price of imported oil,” Huether says. “Petroleum imports now account for 66% of the entire U.S. trade deficit. Excluding petroleum imports, the U.S. trade deficit narrowed to just 1.7% of GDP in the second quarter, the lowest level in nearly a decade.”
Huether says the report “continues to highlight the negative effects of our country’s dependence on foreign sources of energy.” The inflation rate for final sales to domestic purchasers increased at an annual rate of 4.3% in the second quarter, largely driven by a 29% rise in the price of imports driven mainly by the surging price of oil. “The pressing need for increased development of domestic resources should be abundantly clear.”
Huether also says that rising exports underscore the critical importance of free trade agreements. “Rising exports are the brightest light for our economy right now,” he says. “And our biggest foreign markets are those countries with which we have free trade agreements. In fact, so far this year we actually have a surplus in trade of manufactured goods with those countries.
“If Congress has an interest in promoting economic growth, the most important thing it can do right now is move ahead on our pending free trade agreements with Colombia, Panama and South Korea and pass a comprehensive energy policy to lower energy costs for manufacturers, their employees and consumers,” Huether says.