This is Bank of America’s most recent forecast for U.S. economic growth in the second quarter.
The second-largest American bank in assets, the Bank of America, has reduced its estimate of GDP growth for the April-June period from 1.5 percent down to 0.0 percent. This was due to weaker than anticipated consumer spending as reported by the Department of Commerce on Wednesday.
“This was the first drop in consumer spending in this year’s high inflation and Fed hawkish increases, indicating a slightly stronger economy than previously thought,” economists at the bank wrote in a note to clients.
According to the Atlanta Fed’s GDP Tracker, GDP Now, data from the second quarter of 2018, mostly from April and May, suggests that the economy contracted at a 1 percent annual rate. This estimate will be revised on Friday. Friday’s reading was minus 2.1 percentage growth, down from Thursday’s one percent.
Commerce Department’s personal consumption expenditure data for the first quarter of the year and the month ended May showed that consumer spending has remained flat or slightly lower than in January. Wage gains have been outpaced by rising prices, which has resulted in lower inflation-adjusted household earnings. The Fed’s preferred measure of price changes, PCE inflation, was at 6.3 percent in May. This is despite predictions that it would fall as the Fed implemented the largest rate increase in the century.
The Institute of Supply Management announced Friday that the Institute’s barometer of manufacturing activity dropped to its lowest level since May 2020. This was when the economy was at its peak before the outbreak of the pandemic.
Bank of America predicts that the economy will grow by 2.3 percent for the entire year. Bank of America expects a growth rate of just 1.4 percent next and 0.8 percent the year after. This is due to the “lagged effect of tighter financial circumstances cooling the economy.” It estimates that there is a 40% chance of recession next year.