The U.S. economy grew at a 1.5% annualized pace during the second quarter, confirming that economic activity slowed considerably heading into the summer.
Why it matters: The economy is still expanding, but slower growth could give the Federal Reserve more reason to remain cautious about raising interest rates, particularly if other indicators begin showing additional weakness.
- The Bureau of Economic Analysis’ second estimate showed real GDP increased at a 1.5% annualized rate during the second quarter, unchanged from its initial estimate.
- That’s down from 2.1% growth in the first quarter and marks the second-slowest pace of the past year.
Breaking it Down: Consumer spending, exports and investment contributed to the increase in economic activity, while declining government spending partially offset those gains. Imports, which subtract from GDP calculations, also increased during the quarter.
- There were some changes beneath the headline number. Consumer spending was revised higher from the initial estimate, suggesting households were somewhat stronger than initially believed.
- However, imports were also revised higher, largely offsetting that improvement and leaving overall GDP growth unchanged at 1.5%.
Impact on Mortgage Rates: Slower economic growth is generally supportive of lower rates because it reduces the need for restrictive monetary policy. However, with inflation still elevated, the Federal Reserve will likely need more evidence of slowing growth before significantly changing its outlook.
The bottom line: The economy is still growing—just not very fast. At 1.5%, second-quarter growth confirms that momentum has slowed, even if the U.S. remains comfortably out of recession.