The U.S. economy likely maintained steady growth in the second quarter, with a survey of economists forecasting a 2.1% annualized rate, matching the first quarter’s pace, supported by stronger consumer spending and continued double-digit growth in business investment tied to AI infrastructure. Estimates ranged as low as 0.8% and as high as 2.9%, with JPMorgan lowering its own forecast to 1.5% after a June trade-deficit report came in weaker than expected. Two of the specific tailwinds propping up this quarter’s growth, tax refunds and AI capital spending, both carry an expiration date economists are already flagging, which is what NewsTrackerToday traces on as the more consequential detail than the growth rate itself.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, likely accelerated after slowing sharply to a 0.5% pace in the first quarter, helped by larger tax refunds this year that delivered an estimated $140 billion boost to household income during the filing season, alongside spending tied to the recently concluded FIFA World Cup and midterm election-related activity from nonprofits.
Ethan Cole reads the fragility underneath that consumer strength tersely: “Households have been tapping savings and saving less to sustain spending, with the saving rate near a four-year low of 3.0%, even as wages have barely kept pace with inflation. Goldman Sachs economist Joseph Briggs expects that saving rate to climb back to 3.5% by year-end specifically because higher energy prices are set to erode spending power for the rest of the year, particularly for lower-income households. A consumer spending pace this quarter that depends on a shrinking savings cushion isn’t a sustainable growth engine, it’s borrowed time.” That savings-rate fragility, more than this quarter’s headline growth number, is what NewsTrackerToday weighs on as the more important signal for where consumer spending heads next.
Business investment in AI-related equipment is expected to post another quarter of double-digit growth, even as investors express growing concern that technology valuations have become stretched, a tension that shows up starkly in a parallel weakness: investment in physical structures like factories is expected to have contracted for a tenth consecutive quarter, meaning the AI equipment boom is masking real softness elsewhere in business investment.
Daniel Wu, who covers geopolitics and energy, reads the war-related risk sitting underneath this quarter’s otherwise resilient numbers: “The U.S.-led conflict with Iran, now in its sixth month, has pushed average gasoline prices back above $4 a gallon, and economists broadly agree it poses a real downside risk to growth in the second half of the year, even though the U.S. has so far proven more insulated from the fallout than other parts of the world. That insulation is doing a lot of work in this quarter’s numbers, and it isn’t guaranteed to hold if the conflict escalates further or energy prices keep climbing.” That conditional insulation, more than this quarter’s growth figure, is what NewsTrackerToday hinges to as the real variable determining whether growth holds up through year-end.
The Federal Reserve left its benchmark rate unchanged in a 3.50%-3.75% range this week, though three committee members dissented in favor of a quarter-point hike, and economists now expect a possible rate increase as soon as September specifically to address inflation pressures the war has helped stoke, a tightening that would arrive on top of an already steepening Treasury yield curve and mortgage rates up roughly half a point since the conflict began.
None of this confirms how much of this quarter’s resilience simply reflects temporary tailwinds, tax refunds, a World Cup, election-related nonprofit spending, that don’t repeat going forward, versus a durable underlying strength in consumer and business demand. Whether the economy sustains anything close to this quarter’s pace once those specific supports fade and energy costs keep climbing, or whether growth slows meaningfully in the second half as multiple economists are already forecasting, is what News Tracker Today closes with as the real question this GDP report leaves for the rest of the year to settle.
