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Underwhelming Economic Growth

Sigma Investment Counselors

August 10, 2016

Recently released second quarter data suggest that the economic recovery continues to be somewhat lackluster with a seasonally and inflation adjusted increase of 1.2% for the period.  The economy appears to be growing at a 1% rate in 2016 and 2.1% since the end of the recession, the weakest expansion since at least 1949.

There is no shortage of commentary as to why economic progress is disappointing, but very little definitive evidence and very few credible proposals for creating a stronger economy.

In general terms, consumer spending is growing at a reasonable pace, unemployment remains below 5% and there are some signs of improvement in wages.  On the other hand, work force participation remains at essentially record lows and business investment continues to be disappointing.

Investors would be well advised to recognize that a stronger economy would probably be beneficial.  They should also realize that there do not appear to be many clearly defined policy decisions that would necessarily be helpful.

Near term, uncertainty with respect to the eventual outcome for Brexit and the U.S. elections may contribute to continued weakness in business investment.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA®

 

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