US Q2 GDP growth revised lower
US ECONOMIC growth was revised lower to a still-solid pace in the second quarter, but momentum appears to have picked up early in the third quarter as a tight labour market underpins consumer spending.
Gross domestic product increased at a 2.1 per cent annualised rate last quarter, the government said on Wednesday (Aug 30) in its second estimate of GDP for the April-June period. That was revised down from the 2.4 per cent pace reported last month.
Economists polled by Reuters had expected GDP for the second quarter would be unrevised. The revision reflected downgrades to inventory investment as well as business spending on equipment and intellectual property products.
The economy grew at a 2.0 per cent pace in the first quarter and continues to push ahead despite 525 basis points worth of interest rate hikes from the Federal Reserve since March 2022.
It is expanding at a pace well above what Fed officials regard as the non-inflationary growth rate of around 1.8 per cent.
The economy’s resilience raises the risk of borrowing costs remaining higher for a while, but slowing inflation is fuelling optimism that the US central bank is probably done hiking rates and could engineer a “soft landing.” Most economists have walked back their forecasts for a recession this year.
Though the labour market is slowing, with job openings dropping to the lowest level in nearly 2½ years in July, employers are largely hanging on to their workers after difficulties hiring during the pandemic.
That is keeping wage growth elevated, helping to drive consumer spending. Retail sales increased strongly in July, while single-family homebuilding was robust.
Economists have boosted their third-quarter growth estimates to as high as a 5.9 per cent rate, though this likely overstates the health of the economy. REUTERS
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