Slowing US economy turns out to be outperformer

Despite slowing from the first quarter, the United States economy turned in the best second quarter performance among the major developed economies.

In the second quarter, the US economy grew 1.5 percent on an annualised basis. On a non-annualised basis, it grew 0.4 percent. This was slightly down from 0.5 percent in the first quarter.

Japan, the best performer among the major developed economies in the first quarter with 1.3 percent growth, slowed sharply to grow just 0.3 percent in the second quarter.

Germany also managed to grow 0.3 percent in the second quarter, slowing from 0.5 percent in the first quarter.

The French economy was flat in the second quarter and has been unchanged for three consecutive quarters.

That is still better than the economies of the United Kingdom and Italy, both of which shrank 0.7 percent in the second quarter. The second quarter contraction was the third and fourth consecutive quarterly contraction respectively for these two economies.

Percentage change in real GDP
	2011		2012
	Q3	Q4	Q1	Q2
United States	0.3	1.0	0.5	0.4
Japan	1.8	0.1	1.3	0.3
Germany	0.4	-0.1	0.5	0.3
France	0.3	0.0	0.0	0.0
United Kingdom	0.6	-0.4	-0.3	-0.7
Italy	-0.2	-0.7	-0.8	-0.7

Europe is clearly the weak spot in the global economy. Real gross domestic product in the European Union and the euro area fell 0.2 percent in the second quarter after having been flat in the first quarter.

In contrast, data last week showed that the US economy remains relatively robust.

Retail sales jumped 0.8 percent in July after having declined in the previous three months. With the Thomson Reuters/University of Michigan consumer sentiment index rising to 73.6 in August from 72.3 in July, the threat of a collapse in consumer spending appears to have receded for the time being.

Meanwhile, industrial production rose 0.6 percent in July and capacity utilisation hit 79.3 percent, the highest in more than four years.

Notwithstanding a 1.1 percent fall in housing starts in July, housing also appears to remain in recovery. Building permits rose to an annual rate of 812,000 in July, the highest in almost four years, while the National Association of Home Builders/Wells Fargo housing market index rose two points in August to 37, the highest level since February 2007.

Pointing to further growth in the US economy, the Conference Board's index of leading economic indicators rose 0.4 percent in July, reversing the 0.4 percent decline in June.

Ataman Ozyildirim, economist at the Conference Board, said that the “LEI’s six-month growth rate seems to be stabilizing, pointing to a continuing but slow expansion in economic activity for the rest of the year”.