Second-quarter GDP left at 2%, downshifting U.S. economy unlikely to rev up soon

The numbers: The U.S. economy grew more slowly in the second quarter, updated figures confirm, reflecting a downshifting in growth that’s expected to persist through the end of the year largely because of the festering trade fight with China.

Gross domestic product, the official scorecard for the economy, grew at a 2% annual pace from April to June, the government said Thursday. That was unchanged from the previous estimate.

What happened: Consumer spending was exceedingly strong in the spring, though the government trimmed its estimated increase to 4.6% from 4.7%. Households spent a bit less on takeout and other prepared foods.

Consumer outlays account for almost 70% of all U.S. economic activity in the U.S. Households have been buoyed by the strongest labor market in years, which has delivered rising wages and an extremely low unemployment rate.

The decline in businesses investment was revised up to 1.4% from 1.1%, reflecting a bigger drop in outlays on manufacturing-related structures. Heavy industry has been hurt by the trade fight with China, a strong dollar and faltering global economy that’s led to weaker exports.

Adjusted pretax corporate rose at a 3.8% clip in the second quarter. Still good, but not quite as strong as the prior 5.3%.

Government spending, meanwhile, increased at a 4.8% pace instead of 4.5% as previously reported. State and localities spent more on construction of roads and buildings.

Most other figures in the GDP report were little changed. GDP is revised twice after the initial release to take into account new or more accurate information.

Big picture: A look in the rearview mirror shows the economy began to slow in the spring despite robust consumer spending. The road ahead doesn’t look much different.

Economists polled by MarketWatch predict the U.S will grow about 2% in each of the final two quarters of 2019.

The biggest drag on growth is the ongoing trade fight with China. Unless that’s revolved soon, the U.S. is likely to remain constrained. The dispute has sapped exports, manufacturing, farming and business investment. A potential effort by Democrats to impeach President Trump won’t help.