The Commerce Department revised its estimate for second quarter GDP lower. But with four consecutive quarters of positive growth, broader markets largely shrugged off the data. File Photo by John Angelillo/UPI | License Photo
Aug. 30 (UPI) -- Gross domestic product over the three months ending in June was revised lower by 0.3% to 2.1% as investments dry up, the U.S. Commerce Department reported Wednesday.
The U.S. economy has posted four straight quarters of expansion, recovering from a contraction during the early part of last year. The pace of expansion, however, is slowing consistently.
The Bureau of Economic Analysis, part of the Commerce Department, attributed the downward revision to lower private and non-residential investments, though that was partially offset by an increase in government spending.
Rate hikes meant to lower consumer-level inflation are working for the Federal Reserve. By making borrowing more prohibitive by way of higher lending rates, the Fed is working to cool the economy while at the same time avoiding the mass layoffs and sharp economic contraction that could come as a result of a formal recession.
The U.S. economy experienced a mini recession of sorts last year as GDP declined in both the first and second quarters of the year. Pent up demand during the post-vaccination stage of the pandemic helped drive the economy forward this year.
The outlook, however, is deteriorating. As the single-largest investment that most consumers make, the rate on a 30-year, fixed-term mortgage has topped 7% and new home sales are on the decline. Labor is also cooling off, with payroll processor ADP showing new hires were down by almost half from month-ago levels.
Consumer debt is piling up too, with credit card balances topping $1 trillion. That said, the Commerce Department reported that disposable personal income increased by 5.9% in the second quarter to reach $248.5 billion, an upward revision of around $36.3 million from the previous estimate.Savings too are on the rise.
Personal savings were revised higher by $22.7 billion to $892.3 billion. In terms of savings as a percentage of disposable income, the personal savings rate during the second quarter was 4.5%, an increase of 0.1 percentage point.
Craig Erlam, a senior market analyst at OANDA, said that, from his perspective in London, recent data are not indicative of any major shift in the U.S. economy, though recent data do point to a downturn.
"The ADP and revised GDP numbers may attract some attention but they were never likely to have too great an impact," he said.
Markets shrugged off the news, with all major U.S. stock indices trading in positive territory.