U.S. financial progress for final quarter is revised all the way down to a 2.1% annual fee

WASHINGTON (AP) — The U.S. economic system expanded at a 2.1% annual tempo from April via June, displaying continued resilience within the face of upper borrowing prices for customers and companies, the federal government stated Wednesday in a downgrade from its preliminary estimate.

The authorities had beforehand estimated that the economic system expanded at a 2.4% annual fee final quarter.

The Commerce Department’s second estimate of progress final quarter marked a slight acceleration from a 2% annual progress fee from January via March. Though the economic system has been slowed by the Federal Reserve’s strenuous drive to tame inflation with rate of interest hikes, it has managed to maintain increasing, with employers nonetheless hiring and customers nonetheless spending.

Wednesday’s report on the nation’s gross home product — the overall output of products and companies — confirmed that progress final quarter was pushed by upticks in shopper spending, enterprise funding and outlays by state and native governments.

Consumer spending, which accounts for about 70% of the U.S. economic system, rose at a 1.7% annual tempo within the April-June quarter — a good achieve, although down from 4.2% within the first three months of 2023. Excluding housing, enterprise funding rose at a robust 6.1% annual fee final quarter. Investment in housing, harm by increased mortgage charges, fell within the second quarter.

The American economic system — the world’s largest — has proved surprisingly sturdy within the midst of the Fed’s aggressive marketing campaign to stamp out a resurgence of inflation, which final 12 months hit a four-decade excessive. Since March of final 12 months, the Fed has raised its benchmark fee 11 occasions, making borrowing for all the pieces from vehicles to properties to enterprise expansions rather more costly and prompting widespread predictions of a coming recession.

Since peaking at 9.1% in June 2022, year-over-year inflation has fallen kind of steadily. Last month, it got here in at 3.2% — a major enchancment although nonetheless above the Fed’s 2% inflation goal. Excluding unstable meals and power prices, so-called core inflation in July matched the smallest month-to-month rise in almost two years.

Wednesday’s GDP report contained some probably encouraging information for the Fed: One measure of costs — the private consumption expenditures index — rose at a 2.5% annual fee final quarter, down from a 4.1% tempo within the January-March quarter and the smallest improve for the reason that finish of 2020.

Since the Fed started elevating charges, the economic system has been bolstered by a constantly wholesome job market. Employers have added a sturdy common of 258,000 jobs a month this 12 months, although that common has slowed over the previous three months to 218,000.

On Tuesday, a report from the federal government added to proof that the job market is steadily weakening: It confirmed that employers posted far fewer job openings in July and that the quantity of people that stop their jobs tumbled for a second straight month. (When fewer folks stop their jobs, it sometimes means that they aren’t as assured find a brand new one.)

Still, job openings stay properly above their pre-pandemic ranges. The nation’s unemployment fee, at 3.5%, remains to be barely above a half-decade low. And when the federal government points the August jobs report on Friday, economists polled by the info agency FactSet assume it’s going to present that whereas hiring slowed, employers nonetheless added 170,000 jobs.

The mixture of tumbling inflation, continued financial progress and slower however regular hiring has raised hopes for a uncommon “soft landing.” That’s a state of affairs by which the Fed manages to overcome excessive inflation with out inflicting a painful recession.