Plus: Car Sales Surge, Consumer Confidence Dips and Industrial Business Accelerates.

GDP Growth Slows
The United States economy suffered a slowdown in the second quarter of 2010, according to the U.S. Department of Commerce last week. Real gross domestic product (GDP) — the value of goods and services produced in the U.S. adjusted seasonally and for inflation — grew at a 1.7 percent annualized rate in the second quarter, following a 3.7 percent gain in the first quarter.

“The deceleration in real GDP in the second quarter primarily reflected a sharp acceleration in imports and a sharp deceleration in private inventory investment that were partly offset by an upturn in residential fixed investment, accelerations in nonresidential fixed investment and in federal government spending, and an upturn in state and local government spending,” according to the Commerce Dept.

The slowed GDP growth fell short of business leaders’ expectations. The latest CEO economic outlook survey from the Business Roundtable, released last week, found that CEOs expect GDP to increase an average 1.9 percent in 2010, down from the 2.7 percent forecast growth from the previous survey.

“Sales forecasts are down from last quarter, prompting CEOs to remain cautious,” Ivan Seidenberg, chairman of the Business Roundtable and CEO of Verizon Communications, said in an announcement of the results. “However, they are preparing for future demand by increasing investment capital.”

Among the survey’s key findings, 9 percent of CEOs said they expect their company’s sales to decrease in the next six months, up from 4 percent the previous quarter, while 49 percent expect capital spending to increase, up from 43 percent last quarter. Twenty-three percent of respondents expect their company’s employment to decrease in the next six months, compared to 17 percent in the second quarter.

Auto Sales Surge
Automakers posted major sales increases in the U.S. last month, boosting economic prospects for car manufacturers and related industries in their recovery from a difficult year, new industry data show.

According to the latest monthly report from automotive research firm Autodata, total light-vehicle sales in the U.S. rose to 958,966 units in September, representing a seasonally adjusted annual rate of 11.76 million vehicles. This marked a 28.5 percent increase over the 746,104 units sold in September 2009.

“The most encouraging signs: The gains came without an increase in incentives, and sales of pickups, considered an economic indicator because contractors often use the trucks, continued to gain strength,” the Detroit Free Press reports. “Pickup sales through September are up 13.5 percent, and trucks are outperforming cars so far this year, partly because of relatively low gas prices. That is a positive sign for the bottom lines of the Detroit Three, who still depend on trucks for profits.”

The strongest gains were among U.S. car companies. Ford Motor Co. had year-over-year sales rise 46 percent in September, and Chrysler Group LLC had a 61 percent sales increase over last year. Both Ford and Chrysler gained 2.1 points of market share each, ending September with 16.7 percent and 10.4 percent of the market, respectively. Meanwhile, General Motors Co.’s sales rose 10.5 percent, but its market share dropped from 20.8 percent to 18 percent in September.

Despite the gains, some warn that the September sales increases are coming off an unusually low period from 2009, and that government programs from last year, such as Cash for Clunkers, may have distorted the results.

“Industry sales rose 29 percent from last September, but that was deceptive. The government’s Cash for Clunkers rebate program, which ran during July and August of 2009, drew buyers who otherwise would have waited until later in the year,” the Associated Press explains. “September had the uneven sales that have plagued the industry all year. The month started strong thanks to Labor Day promotions, but sales tapered off until the final weekend, when new models and clearance sales on older ones piqued buyers’ interest.”

Consumer Confidence Dips
New reports show that U.S. consumer confidence took a downward swing last month, raising concerns over the strength of the ongoing recovery. Following a gain in August, The Conference Board’s latest Consumer Confidence Index fell to 48.5 in September, down from 53.2 in August.

“September’s pull-back in confidence was due to less favorable business and labor market conditions, coupled with a more pessimistic short-term outlook,” Lynn Franco, director of The Conference Board Consumer Research Center, said in an announcement of the findings. “Overall, consumers’ confidence in the state of the economy remains quite grim. And, with so few expecting conditions to improve in the near term, the pace of economic growth is not likely to pick up in the coming months.”

Consumers who said business conditions are currently “bad” rose from 42.3 percent to 46.1 percent, while those claiming conditions are “good” fell from 8.4 percent to 8.1 percent. The employment outlook also declined. Those who said jobs are “hard to get” rose from 45.5 percent to 46.1 percent, while those stating jobs are “plentiful” decreased to 3.8 percent from 4.0 percent.

A separate monthly consumer index, from Thomson Reuters and the University of Michigan, supports The Conference Board’s findings, showing that consumer sentiment fell seven-tenths of a point in September, reaching 68.2. This decline was attributed to worsening long-term expectations, although most consumers recognized that their current situation was considerably better than during the recession.

Another report last week, from the U.S. Department of Commerce, says that personal consumption expenditures were on an upward trend through most of the summer, rising 0.4 percent, or $41.3 billion, in August. Adjusted for inflation, however, actual expenditure grew by only 0.2 percent in August, far below the growth reported for August 2009. The current decline in consumer confidence and the sluggish growth in personal expenditure may have repercussions through the end of the year.

“That [decline] is setting the stage for a lackluster holiday season, a crucial period because it can make up as much as half of a retailer’s sales,” the Washington Post reports. “Even some of the most optimistic holiday forecasts acknowledge that the results could look weak compared with the more robust consumer spending early this year.”

Industrial Business Accelerates
North America’s industrial sector is “surging forward,” with buyers and sellers looking forward to further business expansion in the near future, according to a semi-annual survey that indicates a sector that’s improving and increasingly optimistic.

Based on responses from more than 3,243 industrial professionals — engineers, purchasers, owners, managers, and sales and marketing executives — mostly located in the U.S., the new findings suggest that more companies are growing, fewer businesses are declining, hiring is resuming, layoffs are winding down and investments are increasing.

In ThomasNet’s latest Industry Market Barometer findings, published this week, 45 percent of respondents say their business grew during the first half of 2010, up from just 17 percent who reported growth during the January-June 2009 period. Looking ahead, 60 percent forecast business growth for the remainder of 2010, and 83 percent of those already growing expect expansion to continue.

Business growth among industrial companies is directly affecting employment in the sector as well, according to the findings: nearly 60 percent of respondents said they plan to keep headcount unchanged in 2010, while 34 percent of respondents said they plan to increase hiring. Only 8 percent plan to downsize this year.

Moreover, the growth of their businesses is giving industrial companies the confidence to begin ramping up for additional growth, reinvesting in technology (40 percent), facilities/renovations (37 percent) and capital equipment (36 percent) for the second half of 2010. In the first half of 2011, technology is projected to be the dominant area of investment.

ThomasNet is the publisher of Industry Market Trends.