The U.S. economy grew at a solid 2.1% annual pace in the second quarter, according to revised figures. However, consumer spending was weaker than originally reported, with an increase of only 0.8% compared to the previous estimate of 1.7%. As consumer spending is a key driver of the economy, this downward revision is notable.
There is more recent evidence suggesting that spending rebounded in the third quarter, along with the broader economy. GDP is forecasted to rise by 4% or more in the third quarter, spanning from July to September. Gross domestic product serves as the official scorecard for the U.S. economy and is updated twice after the preliminary estimate. The second-quarter estimate remained unchanged at 2.1%.
While consumer spending was revised downward, there were some positive revisions in other areas. Business investment was slightly stronger than initially reported, and changes in inventory levels were revised upwards. Furthermore, exports had less of a negative impact on GDP compared to previous estimates. Most other figures in the report remained relatively stable.
The next GDP report for the third quarter will be released at the end of October.
The Big Picture
The final read of the second-quarter GDP serves as a backward-looking indicator. It highlights the surprising resilience of the economy despite rising interest rates and persistent inflation. However, the economy is expected to face more strains, and growth is likely to slow in the coming months. Higher borrowing costs are particularly impacting the housing market and other interest-rate sensitive sectors of the economy.
In Thursday trades, the Dow Jones Industrial Average (DJIA) and S&P 500 (SPX) were set to open higher.