US economic growth was reassessed to a still strong growth rate in the second quarter. It is expected that the momentum of this increase will pick up at the beginning of the third quarter when a tight labor market supports consumer spending.
Domestic Product data rose at an annualized rate of 2.1% last quarter, as the government said on Wednesday in its second GDP estimate for the April-June period. This figure has been revised from the 2.4% rate reported last month.
Economists polled by Reuters had expected GDP for the second quarter to be unchanged. This amendment reflects a decrease in inventory investment as well as business expenses on equipment and intellectual property products. The economy has grown at a rate of 2.0% in the first quarter and continues to advance even though interest rates have been raised by 525 basis points by the Federal Reserve since March 2022.
This economic resilience increases the risk of borrowing costs remaining higher for a certain period of time, but the decline in inflation is giving hope that the US central bank may be done raising interest rates and can implement a 'soft landing'. Most economists have withdrawn their forecasts for a recession this year.
Although the labor market is slowing, with job vacancies falling to their lowest level in nearly 2-1/2 years in July, employers are still retaining workers after struggling to find workers during the pandemic. This makes wage growth higher, helping to drive consumer spending. Retail sales rose sharply in July, while construction of single-family homes grew rapidly.
Economists have raised their third quarter growth estimate to a rate of 5.9%. The US dollar index continued to trade lower with a decrease of 0.41% to a trading level of 103.052
