While the economy expanded strongly in the second quarter, further signs have emerged that growth has since slowed. And the breakdown of Q2 GDP casts additional doubt over the sustainability of the recovery. (See Chart.) Growth was driven by re-stocking, which will give only a temporary boost. Consumer and government spending also helped – but both will be hit by the fiscal squeeze. Net trade failed to boost growth at all. We still expect real GDP growth of just 1.5% this year and next.
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