The US economic growth rate for the second quarter was revised down to 2.1% year on year

The US government said on Wednesday that the US economy grew at an annual rate of 2.1% in the April-June period, showing continued resilience in the face of higher borrowing costs for consumers and businesses, downward from its initial estimates.

The government had previously estimated that the economy expanded at a rate 2.4% annual rate in the last quarter.

The Commerce Department’s second estimate for growth in the most recent quarter saw a slight acceleration from A 2% annual growth rate January through March. Although the economy has slowed due to the Fed’s aggressive campaign to tame inflation by raising interest rates, it has managed to keep expanding, as employers continue to hire and consumers continue to spend.

Wednesday’s report on the country’s gross domestic product — the total output of goods and services — showed that growth in the most recent quarter was driven by increases in consumer spending, business investment and expenditures by state and local governments. A measure of consumer prices in the report also showed slowing inflation, which could ease pressure on the Fed for further interest rate hikes.

“Lower growth and weaker price increases are good news for the Fed,” said Eugenio Aleman, chief economist at Raymond James.

Consumer spending, which accounts for about 70% of the US economy, rose at an annual pace of 1.7% in the April-June quarter – a decent increase, albeit down from 4.2% in the first three months of 2023. It rose at a solid annual rate of 6.1% in The last quarter. Housing investment, which has been hurt by higher mortgage interest rates, fell in the second quarter.

The US economy – the world’s largest – has proved surprisingly resilient in the midst of the Fed’s aggressive campaign to stem a resurgence of inflation, which last year reached its highest level in four decades. Since March last year, the Fed has raised its benchmark interest rate 11 times, making it much more expensive to borrow for everything from cars to homes to business expansions, leading to widespread expectations of a coming recession.

Since peaking at 9.1% in June 2022, year-on-year inflation has fallen fairly steadily. last month, that reached 3.2% A significant improvement, although still above the Fed’s 2% inflation target. Excluding volatile food and energy costs, so-called core inflation in July was identical Smallest monthly rise in nearly two years.

One of the price measures in the GDP report – the personal consumption expenditures index – rose at an annual rate of 2.5% in the most recent quarter, down from the 4.1% pace in the January-March quarter and the smallest increase since the end of 2020.

Since the Fed started raising interest rates, the economy has been boosted by a continued healthy job market. Employers added a solid average of 258,000 jobs per month this year, although that average has slowed over the past three months to 218,000 jobs.

On Tuesday, a report from the government added evidence that the labor market is gradually weakening: it showed it Employers posted far fewer job openings In July, the number of people quitting their jobs fell for the second month in a row. (When fewer people leave their jobs, it usually indicates that they are not confident about finding a new job.)

However, employment opportunities are still well above pre-pandemic levels. The country’s unemployment rate, at 3.5%, is still barely above its lowest level in half a decade. When the government releases its August jobs report on Friday, economists polled by data firm FactSet believe it will show that although hiring slowed, employers added 170,000 jobs.

The combination of subdued inflation, continued economic growth and slower but steady employment has raised hopes of a rare “soft landing”. This is a scenario in which the Fed can beat high inflation without causing a painful recession.

The government’s report on Wednesday, the second of three estimates of growth in the fourth quarter, will be followed by a final calculation late next month.