The US economy grew more slowly than previously assumed in the second quarter

Washington, D.C
CNN
—

The US economy grew more slowly than previously thought in the second quarter – a good sign for the Federal Reserve, which is trying to cool demand to curb inflation.

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. This is slightly slower than the 2.4% originally estimated by the ministry.

The second estimate included higher consumer spending, government spending and exports compared to the first estimate. Meanwhile, business investment and inventories were revised down. Business investment – also known as non-residential fixed investment – has been revised to a growth rate of 6.1%, compared with a growth rate of 7.7% in the first estimate. Residential fixed asset investment, reflecting US housing market conditions, was less of a drag on growth than previously thought.

Economic growth in the second quarter was broad-based for the most part, but there were some signs of weakening demand for goods purchases and imports. Consumer spending, which accounts for around 70% of economic output, was revised slightly upwards in the second estimate.

Economists were generally expecting a robust summer as Americans spend heavily on travel, food and other personal experiences. Retail spending skyrocketed in July as the movie Barbie was 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 US economy was strong over the summer months, but that remarkable strength kept some Fed officials nervous as they met to discuss monetary policy in July. The central bank decided to raise interest rates by a quarter point to their highest level in 22 years.

Fed Chair Jerome Powell said last week that if the economy doesn’t slow, there could be more rate hikes.

“Additional evidence of sustained above-trend growth could jeopardize further progress on inflation and warrant further monetary tightening,” Powell said at the Kansas City Fed’s annual economic symposium.

The Atlanta Fed currently estimates that GDP growth will accelerate significantly in the third quarter to an annual rate of 5.9%.

This story continues to evolve and be updated.