GDP growth April to June

It is worth trawling the details of some of the 2/Q GDP reports to get some idea what might be behind the economic slow-down that started in April. In the case of the US, strong growth in investment and exports has been met from imports. The UK saw good growth in the second quarter boosted by stock building rather than final demand. Japan, as always, has to rely on growth in net exports with very little in the way of domestic demand whereas Germany has the benefit of very strong investment demand as well as net exports. In summary, aggregating the four economies, it does not seem that it is domestic demand that is the problem. This grew by an annualised 2.6% in the first half of 2010. For some unexplained reason, this was reduced to 1.7% by a drag from net trade but on top of that, there was a build up in inventories which resulted in overall GDP growth of 3.0% in the first half of 2010. It may be that the surge in imports has led to some involuntary stock building, the run down of which might explain the recent weakness in production.

Watch this space for additional comments as more countries release data.