The U.S. Economy Grew More Than Previously Estimated In Q2 As Consumer Spending Remains Strong

The U.S. economy grew 2.2% in the second quarter of the year, slightly less than in the first one (when it grew 2.5%) but above its previous estimate of 1.5%, new figures show.

The data from the Commerce Department's Bureau of Economic Analysis noted that "real GDP was revised up 0.7 percentage point from the second estimate, primarily reflecting upward revisions to investment, consumer spending, and government spending." Consumer spending, which accounts for about 70% of the U.S. economic activity, climbed 3.8%, up from 0.7% in the first quarter.

The report went on to note that consumer spending, investment and exports were the main contributors to the figure. The figure was dragged down by increased imports.

The leading industry contributors, the document noted, were real estate, information, durable goods manufacturing, finance and insurance and rental and leasing. In contrast, transportation and warehousing, retail trading and nondurable goods manufacturing dragged down the figure.

Also on Wednesday, odds of a rate hike by the Federal Reserve decreased significantly after the central bank's preferred inflation gauge was much lower than expected.

The CME Group's FedWatch tool showed that chances that interest rates remain at current levels now stand at 62.9%, compared to 49.1% on Tuesday.

According to the latest data from the Commerce Department, the personal consumption expenditures price index climbed a seasonally adjusted 0.3% for the month. The 12-month gain stood at 3.4%, below the 3.7% expected by economists.

However, the core index showed a 0.2% increase, below the 0.3% expected by economists. The annual figure stood at 3%, below the 3.3% expected by analysts.

Energy costs led the increase. Gasoline climbed 4.4%, while transportation services gained 1.4%. Energy goods and services rose 2.3%.

However, consumer confidence keeps deteriorating. The Conference Board Consumer Confidence Index released new figures on Tuesday showing that its index fell by 6.7 points, from 88.6 in August to 81.9. The Present Situation Index, which surveys consumers' assessment of business and labor market conditions, and the Expectations Index, based on their outlook for income, business and labor market conditions, also plummeted.

The surge in fuel costs, which is around historical highs, were a key factor in consumers' assessment of the situation. "Consumers also frequently cited politics, trade, and employment in their write-in responses, though to a lesser extent," the document noted.

Elsewhere, private companies created more jobs than expected in September, according to the latest figures.

ADP detailed that payrolls increased by 90,000, compared to the Dow Jones consensus estimate of 68,000.

"Hiring accelerated for the first time since May, led by education and health care and leisure and hospitality," the report noted, while "financial activities and professional and business services showed weakness."

ADP Chief Economist Nela Richardson described the report as "strong." "After a three-month slowdown, job creation rebounded and pay growth remained solid," she added.