Latest news with #business investment
Yahoo
20 hours ago
- Business
- Yahoo
US economic growth likely rebounded in Q2, but with weak underlying details
By Lucia Mutikani WASHINGTON (Reuters) -U.S. economic growth likely rebounded in the second quarter as the flow of imports subsided, but with consumer spending anticipated to have increased moderately and business investment in equipment stalled that would grossly exaggerate the economy's health. The Commerce Department's advance gross domestic product report on Wednesday would be heavily distorted by trade as was the case in the January-March quarter when GDP contracted for the first time in three years. Economists said President Donald Trump's protectionist trade policy, including sweeping tariffs on imports as well as delaying higher duties, had made it difficult to get a clear pulse on the economy. They urged focusing on final sales to private domestic purchasers, viewed by economists and policymakers alike as a barometer of underlying U.S. economic growth, which is forecast to have slowed from the first quarter's moderate growth pace. "For the second quarter in a row, the headline GDP figures are not going to offer an accurate view of the underlying picture," said Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets. "The ripple effects from the Trump administration's unpredictable tariffs strategy spread widely through the economy. The primary impact was to create caution in the corporate community." A Reuters survey of economists forecast GDP likely increased at a 2.4% annualized rate last quarter after declining at a 0.5% pace in the first quarter. The size of the economy is also expected to swell above $30 trillion for the first time ever before accounting for inflation. The survey was, however, concluded before data on Tuesday showed the goods trade deficit shrinking to its smallest in nearly two years in June and inventories rising marginally. That prompted economists to upgrade their GDP growth estimates by as much as 0.8 percentage point to as high as a 3.3% pace. Trade chopped off a record 4.61 percentage points from GDP in the first quarter. Though a reversal is expected, some of the boost could be offset by low inventories, the result of the ebb in the flow of foreign merchandise. Trade and inventories are the most volatile components of GDP. Inventories added 2.59 percentage points to GDP in the January-March quarter. Economists estimated the economy grew less than 1.5% in the first half of the year. They anticipated a lackluster second half, which would limit growth to around 1.5% or even less for the full year, a sharp slowdown from the 2.8% notched in 2024. Though the White House has announced a number of trade agreements, economists said the nation's effective tariff rate remained one of the highest since the 1930s and noted that about 60% of the nation's imports remained uncovered by a deal. LABOR MARKET KEY "The economy is not going to be able to close the gap relative to what we saw last year when it comes to GDP growth, because the tariffs are going to ... start showing up in the inflation numbers and hurt real disposable income, so consumers aren't going to be spending as aggressively as they have in the past," said Ryan Sweet, chief economist at Oxford Economics. Economists expect the Federal Reserve will keep its benchmark interest rate in the 4.25%-4.50% range after the end of a two-day policy meeting on Wednesday, resisting pressure from Trump to lower borrowing costs. The Fed cut rates three times in 2024, with the last move coming in December. "The key is the job market. As long as layoffs don't rise significantly, then the economy will be able to continue to muddle through the second half of this year and there's not a lot of urgency for the Fed to start cutting interest rates," said Sweet. "The next rate cut occurs in December." Consumer spending, which accounts for more than two-thirds of the economy, was forecast to have picked up, though moderately after nearly stalling in the first quarter. Business spending on equipment was estimated to have been tepid or even declined. A rebound was expected in government spending, though that is likely to be limited this year by ongoing cuts in some areas. Final sales to private domestic purchasers, which exclude trade, inventories and government spending, were forecast to have moderated from the first quarter's 1.9% growth pace. Though the passage of the One Big Beautiful Bill removed fiscal policy uncertainty, the nonpartisan Congressional Budget Office has estimated its tax cuts and spending provisions would add $3.4 trillion to the nation's $36.2 trillion debt and only raise inflation-adjusted GDP by an average of 0.5% over 10 years. Economists worried the White House's immigration crackdown could stunt growth through loss of productivity. "Hopefully productivity goes up because of AI and other kind of things," said Sung Won Sohn, a finance and economics professor at Loyola Marymount University. "But labor force growth is slowing, in part, due to the disruption in immigration and with fewer people joining the labor force, economic growth will slow and productivity alone is not going to support economic growth." Sign in to access your portfolio
Bloomberg
21-07-2025
- Business
- Bloomberg
Firms See Canada Escaping Worst Tariff Outcomes, Survey Shows
By and Randy Thanthong-Knight Save Uncertainty about US President Donald Trump's trade policy is curbing Canadian business investment and consumer spending, even though firms see the economy avoiding a bad recession, central bank surveys show. In the first quarterly reports since the Bank of Canada paused rate cuts in April, businesses and consumers appear to have adopted policymakers' cautious stance amid rapidly changing tariff and trade policy. Firms slowed hiring and investment, while Canadians tightened their belts due to fear of job losses.
Times of Oman
19-07-2025
- Business
- Times of Oman
India sees strong 12.6% growth in investment confidence in Q3 2025, highest among 32 economies: Report
New Delhi: Despite witnessing a slight drop of 1.4 per cent in business investment confidence, India maintained the highest year-on-year confidence growth among 32 economies surveyed in Q3 2025, with a robust 12.6 per cent rise, according to the D&B Global Business Investment Confidence Index of Dun & Bradstreet (D&B), a data and analytics firm. According to the report, the Global Business Investment Confidence Index fell 13.1 per cent quarter-on-quarter (q/q) for Q3 2025, the third consecutive quarter of contraction. The drop in confidence is broad-based, with businesses reporting sharp declines in all five sub-indices, compared with Q2 2025, when only the amount of capital expenditure and the size of the workforce were expected to decline. The report highlights that nearly half of businesses (46.8 per cent) reported supply chain stability as very important to determining investments for Q3 2025, while tariff uncertainty was the lowest rated determining factor, similar to domestic interest rates. This aligns with the findings reported earlier in this report; the Global Supply Chain Continuity Index is the lowest of all our indices, at 99.9 for Q3. In the global scenario, the investment confidence fell more in advanced economies than in emerging economies. Even after excluding the U.S., which has the largest weight and fell 16.7 per cent q/q, confidence in advanced economies fell more than in emerging economies. France, Japan, Germany, and Spain recorded the largest falls in advanced economies, reversing improvements made in Q2. Among emerging economies, the largest q/q falls were recorded by the Russian Federation (-26.1 per cent), Brazil (-23.9 per cent), and South Africa (-20.7 per cent). The Central Bank of Brazil has aggressively increased the Selic rate by 425bps since last year, heavily dampening capital expenditure plans. The U.S. is South Africa's third-largest market for automobile exports, so businesses in South Africa are greatly exposed to 25 per cent tariffs. The manufacturing sector recorded a larger drop (-17.2 per cent) in investment confidence than the services sector (-10.8 per cent) for Q3 2025. The biggest declines were the manufacturers of capital goods (-33.1 per cent), food (-26.9 per cent), and automotives (-26.4 per cent). Of the manufacturing sub-sectors, the manufacturing of chemicals reported the smallest drop in confidence, of -14.8 per cent, albeit still a significant decline. This may reflect the exemptions to new U.S. tariffs, particularly those related to pharmaceutical products. Positively, for Q3 2025, businesses reported an expected capacity utilisation of 68.9 per cent for the services sector and 69.3 per cent for the manufacturing sector, the first q/q increase since Q1 2024, according to the report. "Though this is a positive signal for future capital expenditure, the level remains below the 2024 averages of 73.9% and 74.1% for services and manufacturing, respectively," the report added.
