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    US GDP forecasts fall as consumption worsens

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    Inflation-adjusted spending fell 0.4% more than expected in May, led by a drop in spending on goods (Image: REUTERS/Lucy Nicholson)

    A series of data showing lower consumer spending, worsening sentiment and timid industry activity suggest that the US economy USA is more fragile and several analysts have lowered their growth estimates.

    The highlight was the first decline of the year in personal expenses adjusted to inflation in may.

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    Gains in each of the previous four months were also revised downwards, indicating that demand at the start of the year was weaker than previously thought.

    Surveys of home sales and industrial activity also show signs of trouble.

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    The weakness in consumer spending, which is by far the biggest component of the GDP US, worsened the deterioration of the outlook that already made some optimists more cautious at the beginning of the week.

    The economists of Morgan Stanley now estimate annualized growth of 0.3% in the second quarter, a sharp cut from 2% just a few days ago.

    Data released on Wednesday showed the economy shrank 1.6% in the first three months of the year – a worse performance than previously reported due to a sharp downward revision in consumer spending.

    Amherst Pierpont Securities’ Stephen Stanley cut his second-quarter growth estimate by nearly a percentage point on Thursday to 2.2%, saying in a note that “the consumer spending landscape has darkened dramatically.”

    usa inflation
    Inflation-adjusted spending fell 0.4% higher than expected in May, led by a drop in spending on goods (Image: REUTERS/Andrew Kelly/File photo)

    While slower demand could be good news for the Federal Reservewhich has been aggressively raising interest rates in an effort to contain inflation, worries about a recession continue to mount.

    Inflation-adjusted spending fell 0.4% higher than expected in May, led by a drop in spending on goods.

    Service spending, however, proved resilient, suggesting consumers are shifting away from buying items like furniture and cars and turning more to things like international travel as health concerns related to the pandemic subside.

    Even so, the general slowdown in household spending fuels a narrative that the economy is staggering into recession.

    “We still think services will hold back consumer spending over the summer, but when the holidays come to an end, the boost in services may not be enough to keep overall consumer spending positive,” economists at Wells Fargo said in a note on Thursday. Thursday.

    In addition, consumer confidence continues to decline. The University of Michigan sentiment indicator dropped more than 8 points in June to a record low of 50 points.

    This week’s Conference Board data showed a similar rise in pessimism, with the weakest expectations in nearly a decade.

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    Source: Moneytimes

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