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The slowdown in the economy’s growth in the second quarter, to 1.5% from 2.1% in the prior quarter, is a bit misleading. Consumer and business spending remained strong, with consumption up 3.2% and business equipment spending up 15.2%, the latter mostly the result of heavy spending on computer chips in the artificial intelligence race. Despite flat government spending, final sales to domestic purchasers rose a strong 3.9%. This measure is often used to track underlying spending momentum by excluding foreign trade and inventory movements. And that is where the moderation in second-quarter GDP growth came from. Import growth (11.5%) outstripped export growth (4.5%). The drop in the value of inventories pulled nearly a full percentage point of GDP growth from the second quarter. But much of this drop was the result of a decline in petroleum stockpiles, as U.S. exports of petroleum increased sharply while imports of petroleum decreased.
