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UPDATE: US GDP growth revised down to 2% in Q2; consumer spending at 4-year high

U.S. economic growth slowed slightly more than initially estimated in the second quarter, but consumer spending was revised up to its fastest pace in four years and partially offset the impact of the country's trade tensions with China.

The U.S. economy expanded at an annualized rate of 2.0% in the second quarter, below the prior estimate of 2.1% and the 3.1% rate in the first quarter, a second estimate from the Bureau of Economic Analysis showed. The Econoday consensus forecast was for a 2.0% real GDP growth rate in the second quarter.

The revised second quarter GDP reading reflects downward revisions to exports, private inventory investment, residential investment, as well as government spending. These were partly offset by an upward revision to personal consumption expenditures. Imports were unrevised.

"Business fixed investment and net exports were both revised lower, which is at least in part a reflection of the ongoing trade war with China," analysts led by Acting Chief Economist Jay H. Bryson at Wells Fargo Securities wrote in a research note.

Personal consumption expenditures were revised higher to an annual rate of 4.7% from a previous estimate of 4.3%, marking the strongest reading since a 4.9% increase in the fourth quarter of 2014.

Corporate profits bounced back in the second quarter with a 2.7% annual increase following a 2.2% decline in the first quarter. However, profits will likely face headwinds in the rest of the year, analysts warned, after China and the U.S. announced another round of tit-for-tat tariff actions last week.

"[T]he most recent escalation in the trade war will leave more firms — or perhaps more aspects of firms' supply chains — exposed to tariffs. ... As more products come under tariffs, firms may have a more plausible justification to raise prices," Wells Fargo Securities said, noting that the planned increases in tariffs later this year will directly affect consumer products.

In the second quarter, the PCE price index rose at a quarterly rate of 2.3%, consistent with the initial estimate but higher than the prior quarter's 0.4% growth rate. Excluding food and energy prices, the index was up 1.7%, compared with a 1.8% rise projected previously and a rise of 1.1% in the first quarter.

The third GDP estimate is due Sept. 26, the Bureau of Economic Analysis said.