Second-quarter U.S. economic growth was revised down Wednesday as weak business spending more than offset stronger consumer spending.
The government announced that gross domestic product (GDP) grew at an annual pace of 2.1% for the three months from April to June. Initial estimates put economic growth at 2.4% for the quarter.
Even after the downward revision, the economy is still growing faster than many economists see its long-term potential. Fed officials have said the economy would have to grow below potential, which they estimate is 1.8% a year, for inflation to fall to the central bank’s 2% target.
GDP, the government’s main measure of economic activity in the United States, rose 2% in the first three months of the year. Many economists expect a full recession in 2023, and the economy was expected to slow this year, but it appears to have accelerated.
Many forecasters expect the economy to grow 2.5% in the third quarter. The Atlanta Federal Reserve Bank’s GDPNOW said the data released so far is consistent with a growth rate of 5.9 percent. That number is likely to drop as more data emerges on third-quarter activity, but it suggests growth is still at a high pace this quarter.
On the other hand, surveys by regional federal banks and private data companies appear to show a significant slowdown in August. A survey of executives conducted by S&P Global last week showed manufacturing output contracted in August and service sector output growth slowed.
Sluggish capital investment and inventories were the main reasons for the downward revision. Profit before tax decreased by 0.4% annually and decreased by 6.5% year-on-year.
Private consumption growth was revised upward to 1.7% annually from the previous forecast of 1.6%.
The personal consumption expenditure price index, which is an indicator of inflation, is It increased by 2.5% in the same quarter, and was revised downward by 0.1 percentage points. The PCE price index, which excludes food and energy prices, rose 3.7%, down 0.1 percentage points.
