Economic growth in the United States for the 2^nd quarter was revised downward today from an initial estimate of 2.4% to 1.6%. The main culprits to the lower growth estimate were lower inventories and a higher trade deficit than previously estimated. However, GDP was higher than analysts had expected. Personal consumption was revised higher to 2.0% in the 2^nd quarter from an initial estimate of 1.6%. Core personal consumption expenditures (PCE), which excludes food and energy and is the Fed’s preferred measure of spending, was unchanged from the initial estimate of 1.1%. Gross private domestic fixed investment was also revised upward to 17.6% from an initial estimate of 17.0%. Exports were revised downward to 9.1% from an initial estimate of 10.3% and imports were revised upward to 32.4% from 28.8%, creating a higher trade deficit for the period.

 

The economy has slowed recently as consumers and businesses both remain cautious. High unemployment, lower home and equity values and tight credit continue to lead consumers to restrain spending. The Fed continues to monitor the economy for any further slowdown in growth.