When is bad news good news? Well, perhaps it is when the nation's gross domestic product slows, but does not do so to the extent forecast by many. That, in fact, is precisely what happened in the second quarter.

Specifically, the U.S. Commerce Department released data earlier this morning affirming what most had expected--namely that GDP growth had slowed during the most recent three months. However, the deceleration to an expected 1.3%, or so, was not quite that severe, as growth actually eased to 1.5%. Still, that was below the upwardly revised first-quarter rate of 2.0%. (The initial quarter's earlier estimated GDP increase had been a slightly more subdued 1.9%.)

However, the latest rate of improvement, while better than the more dire predictions, was still underwhelming to say the least, and further affirms that our nation is, indeed, in a soft spot in the current cycle of increasing business activity.

The U.S. economy's growth largely pulled back in the period on slower improvement in consumer spending. This deceleration in the consumer sector suggests that the domestic fiscal worries may be becoming a bigger factor in the public's spending. It should be noted that unless the two political parties come together in the coming months, a set of tax increases and mandated spending reductions are set to get under way by yearend.

Nevertheless, the economy has now grown for 12 quarters in a row following the deep and painful 2007-2009 recession. However, the tepid nature of the expansion during this formative recovery has been insufficient to markedly lower the nation's unemployment rate--which still stands at 8.2% or invite much in the way of vigorous job creation. Indeed, the average monthly rate of job growth during the second quarter was just 75,000 per month.

Individually within this report, we saw slowing rates of growth in both residential and nonresidential construction, and further reductions in federal, state, and local government spending. Also, inventory investment eased modestly in the period, but, encouragingly, export growth quickened.

All in all, it was an uninspiring report, but also was not as bad as some had feared. Going forward, we think growth will quicken a bit in the second half, but probably not to much more than 2%. 

At the time of this article's writing, the author did not have positions in any of the companies mentioned.