Economy Watch: Growth Trudges Along at 1.5 Percent

The U.S. economy expanded by a tepid 1.5 percent during the second quarter of 2012, according to Friday's preliminary report by the Department of Commerce.

The U.S. economy expanded by a tepid 1.5 percent during the second quarter of 2012, according to Friday’s preliminary report by the Department of Commerce. That was a slowdown in growth from the first quarter, whose final estimate turned out to be 2 percent, after being revised upward twice.

Too many second-quarter headwinds were against the economy for it to see increased growth. Consumers are stepping back from spending; businesses aren’t hiring as much as they did; and government at all levels is shrinking. Not only that, net imports—a direct subtraction from GDP—grew during the quarter.

One of the main questions raised by the lackluster expansion of the economy is what the Fed plans to do about it, provided the Fed can do very much. The Federal Open Market Committee is meeting this week, which will give the central bank the chance to announce some kind of stimulus, or not. Expert opinion is divided about what the Fed will do, but investors are hoping for QE3.

Apartment vacancies drop nationwide

According to the Census Bureau on Friday, the vacancy rate for rental housing nationwide during the second quarter 2012 averaged 8.6 percent, a drop of 0.6 percent from the same quarter in 2011. Quarter-over-quarter, the drop was 0.2 percent. More evidence (if any is needed) that the apartment market is on a roll, at least for landlords.

The U.S. rate of homeownership, 65.5 percent in the second quarter of 2012, was 0.4 percentage points lower than during the second quarter 2011 (65.9 percent), noted the bureau. On the other hand, ownership was 0.1 percentage point higher in 2Q12 than the rate during the first quarter (65.4 percent), so it’s possible that the rate is bouncing along some kind of floor.

The bureau also reported that its measure of “homeowner housing vacancy” during the second quarter was 2.1 percent, down from 2.5 percent a year ago. Unlike the rental vacancies, it’s less clear what that movement means, though it might be a combination of some previously for-sale housing stock become rental properties, and foreclosures working their way through.

Wall Street seemed to believe in the vague promises of the European Central Bank regarding the euro and the vague hopes that the Federal Reserve is going to stimulate the U.S. economy in some meaningful way, and so had a fine day on Friday. The Dow Jones Industrial Average gained 187.73 points, or 1.46 percent, while the S&P 500 and the Nasdaq were up 1.91 percent and 2.24 percent, respectively.