The US economy grew more slowly in the second quarter than previously estimated — a good sign for the Federal Reserve, which is attempting to cool demand to bring down price increases.
Gross domestic product, the broadest measure of economic output, rose at an annualized rate of 2.1% in the second quarter, according to the Commerce Department’s second estimate, released Wednesday morning. That’s a slightly slower pace than the 2.4% the department initially estimated.
The second estimate factored in greater consumer spending, government outlays and exports, compared with the initial estimate. Meanwhile, business investment and inventories were revised lower. Business investment — referred to as nonresidential fixed investment — was revised to a 6.1% rate of growth, compared with a 7.7% rate in the first estimate. Residential fixed investment, which reflects conditions in the US housing market, had less of a drag on growth than previously estimated.
Economic growth in the second quarter was mostly broad based, but there were some signs of weakened demand for goods purchases and imports. Consumer spending, which accounts for about 70% of economic output, was revised slightly higher in the second estimate.
Economists widely expected the summer to be robust, with Americans spending big on travel, dining and other in-person experiences. Retail spending jumped in July as the “Barbie” film became a smash hit and Taylor Swift sold out major stadiums across the United States. The Commerce Department releases July figures on consumer spending, which include retail sales, on Thursday.
The US economy powered through the summer months, but that remarkable strength kept some Fed officials on edge when they met in July to discuss monetary policy. The central bank opted to raise interest rates by a quarter point to their highest level in 22 years.
Fed Chair Jerome Powell said last week there could be more rate hikes coming down the pike if the economy doesn’t slow.
“Additional evidence of persistently above-trend growth could put further progress on inflation at risk and could warrant further tightening of monetary policy,” Powell said at the Kansas City Fed’s annual economic symposium.
The Atlanta Fed is currently estimating that GDP growth will accelerate sharply to an annualized 5.9% rate in the third quarter.
This story is developing and will be updated.
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