Projections of U.S. economic growth in the second quarter have declined rapidly over the past month in a worrying sign for the health of the economy, according to an estimate released by the Federal Reserve Bank of Atlanta on Monday.
Gross domestic product (GDP) is projected to total just 1.8% in the second quarter of 2024, down from the estimate of 4.2% made one month earlier, according to the Atlanta Fed. The downward revision follows disappointing growth in manufacturing and spending, as well as persistently high inflation.
The Atlanta Fed frequently adjusts its economic growth estimate during the quarter, with the most recent revision following a poor report in the manufacturing sector and a decline in construction spending, according to the Atlanta Fed. GDP growth for the second quarter was previously estimated to be 2.7% on May 31, with real private fixed investment growth and personal consumption expenditure being revised down from 3.1% and 2.6% to 1.5% and 1.8%, respectively, in Monday’s release.
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ATL Fed Nowcast plunges to 1.8% as their consumer spending estimate collapses – less than 3 weeks ago, they were forecasting 4.2% growth for Q2; a recession likely began in Apr… pic.twitter.com/ZC7gaP4sRw— E.J. Antoni, Ph.D. (@RealEJAntoni) June 3, 2024
BOOMOne report that contributed to the revision by the Atlanta Fed was the Institute for Supply Management’s manufacturing activity index, which showed a contraction in the sector, the 18th month out of the last 19 that it has done so. The new orders index was particularly bleak for the state of the sector, declining from 49.1% to 45.4%, with anything below 50% representing a contraction.
Construction spending declined by 0.1% in April, dragging on the Atlanta Fed’s GDP estimate, according to data released Monday by the Census Bureau. Private construction spending declined by 0.1%, while public construction spending declined by 0.2%.
GDP growth for the first quarter of 2024 was revised down near the end of May from the already low 1.6% to 1.3% year-over-year, despite growth being 4.9% and 3.4% in the third and fourth quarters of 2023, respectively.
The several downward revisions from the Atlanta Fed also follow sustained inflation growth in the Federal Reserve’s preferred inflation gauge, which totaled 2.7% in April, degrading real increases in spending and output. The more broadly watched consumer price index measured 3.4% in April, having failed to decelerate below 3% since it peaked under President Joe Biden at 9% in June 2022.
Slow growth and high inflation have fueled fears that the economy is entering a period of stagflation, which wreaked havoc on Americans’ finances in the 1970’s and 1980’s.
The White House did not immediately respond to a request to comment from the Daily Caller News Foundation.
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