U.S. Economy Slows to 1.5% Growth As Inflation Heats Up Again
By CU Today Staff —
WASHINGTON— The U.S. economy grew at a 1.5% annual rate during the second quarter, slowing from 2.1% in the first three months of the year as weaker government spending, slower investment and softer export growth offset stronger consumer spending, according to the Commerce Department's advance estimate of gross domestic product.
The Bureau of Economic Analysis said consumer spending remained the primary driver of growth, while real final sales to private domestic purchasers—a key measure of underlying private-sector demand—accelerated to 3.9% from 1.7% in the first quarter. Investment and exports also contributed to growth, although both slowed from the previous quarter, while imports increased and government spending declined.
Inflation pressures remained elevated. The price index for gross domestic purchases rose 5.7% in the second quarter, up from 3.6% in the first quarter. The Personal Consumption Expenditures price index, the Federal Reserve's preferred inflation gauge, increased 5.1%, while core PCE, which excludes food and energy, rose 3.4%. The BEA will release its second estimate of second-quarter GDP on Aug. 26.
“The headline number understates the real strength in this economy," said America's Credit Unions' Senior Economist Dawit Kebede. "Consumer spending and business investment both held up well, with households actually stepping up their spending from the prior quarter despite soft consumer sentiment and lingering inflation worries. The drags came almost entirely from the noisier, less telling pieces: inventories, net exports, and government spending. Setting those aside, final private domestic demand looks solid, which is the cleaner read on where the economy stands."
Originally reported by CU Today.