What To Expect From Wednesday's Report On GDP
The economy likely grew at an annual rate of 2.3% in the second quarter, up from a 0.5% decrease in the first quarter, according to forecasts.
The bounce-back could reflect a decline in imports following a surge in the first quarter.
Several economists said tariffs and high interest rates are dragging on economic growth.U.S. economic growth is expected to have rebounded in the second quarter, but experts say this week's report on the Gross Domestic Product may not say much about the economy's actual health. A preliminary report on Wednesday from the Bureau of Economic Analysis is expected to show the U.S. economy grew at an annual rate of 2.3% in the second quarter, according to a survey of economists by Dow Jones Newswires and The Wall Street Journal.
That's an improvement from the first quarter, when GDP shrank at a 0.5% annual rate. However, the growth rate would be slightly below the 2.5% average since 2010.GDP is widely watched as a barometer for the health of the economy, and an indicator of whether the standard of living is improving or getting worse for U.S. residents. This time around, however, the GDP report may be harder to parse than usual, economists said.
Trade, Monetary Policies Muddy Economic Measure
Companies scrambled to bring in products ahead of tariff deadlines, dragging GDP down in the first quarter. Imports are counted against economic growth to avoid transactions being double-counted in the official figures.
Similarly, a drop-off in imports in the second quarter may make the economic growth look faster than it actually is.The economy is facing several headwinds, including President Donald Trump's trade war and the Federal Reserve's war on inflation, which have kept borrowing costs high for all kinds of loans."The economy's underlying momentum likely remained weak following the hit from the tariff shock and the ongoing drag from high interest rates, with consumption rising only modestly and investment falling," economists at Pantheon Macroeconomics, led by Samuel Tombs, Chief U.S. economist, wrote in a commentary.The data could add to recent evidence that consumer spending, the biggest part of the GDP, is barely keeping up with inflation."Cautious consumers are largely behind the slowdown," Mark Zandi, chief economist at Moody's Analytics, wrote on the social media platform X. "Real consumer spending has gone nowhere since the end of last year, and with the release of the June data this week, we will see that consumers are still on the sidelines. And this is before the tariff-related price increases kick into full swing."Whatever Wednesday's report shows, it likely won't be the last word on economic growth in the second quarter: the bureau is scheduled to revise the GDP figure twice, as new data comes in.
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