US economic Growth Trimmed On Inventories; Retains Underlying Momentum

• The U.S. economy grew at a slightly less brisk pace than initially thought in the second quarter (2.1% vs. forecasted 2.4%) as businesses liquidated inventory, but momentum appears to have picked up early this quarter as a tight labour market underpins consumer spending.
• The report from the Commerce Department on Wednesday also confirmed that inflation pressures moderated last quarter. The economy continues to expand despite 525 basis points worth of interest rate hikes from the Federal Reserve since March 2022.
• "The downgrade to second-quarter GDP growth will be welcomed by Fed officials and reinforces our expectations for a policy pause in September but the door will remain open to further tightening," said Lydia Boussour, a senior economist at EY-Parthenon in New York. "Data point to steady economic momentum into the second half of the year and confirm that a recession isn't on the near-term horizon."
• There were also downward revisions to business spending on equipment and intellectual products. These offset a slight upgrade to consumer spending, which accounts for more than two-thirds of U.S. economic activity. Trade subtracted more from GDP growth than initially estimated.

(Source: Reuters)