Washington, D.C. CNN –
The U.S. economy grew slower than previously expected in the second quarter, a good sign for the Federal Reserve, which is trying to cool demand to curb price increases.
Gross domestic product, the broadest measure of economic output, rose at an annual rate of 2.1% in the second quarter, according to the Commerce Department’s second estimate released Wednesday morning. That’s slightly slower than the ministry’s original estimate of 2.4%.
The second estimate took into account higher consumer spending, government spending and exports compared to the first estimate. Meanwhile, business investment and inventories were revised downwards. Business investment – also called non-residential fixed investment – was revised to a growth rate of 6.1%, compared to a rate of 7.7% in the first estimate. Residential fixed investment, reflecting U.S. housing market conditions, had less of a negative impact on growth than previously estimated.
Economic growth in the second quarter was mostly broad-based, but there were some signs of weaker demand for goods purchases and imports. Consumer spending, which accounts for around 70% of economic output, was revised upwards slightly in the second estimate.
Economists generally expected a robust summer as Americans spent heavily on travel, dining and other personal experiences. Retail spending surged in July as the film “Barbie” became a smash hit and Taylor Swift sold out major stadiums across the United States. The Commerce Department will release July consumer spending figures, which include retail sales, on Thursday.
The U.S. economy weathered the summer months well, but that remarkable strength left some Fed officials nervous when they met in July to discuss monetary policy. The central bank decided to raise interest rates by a quarter point to their highest level in 22 years.
Fed Chairman Jerome Powell said last week that there could be more interest rate hikes if the economy doesn’t slow down.
“Additional evidence of continued above-trend growth could threaten further progress on inflation and justify further tightening of monetary policy,” Powell said at the Kansas City Fed’s annual economic symposium.
The Atlanta Fed currently estimates that GDP growth will accelerate significantly to an annual rate of 5.9% in the third quarter.
This story continues to evolve and be updated.