Bank of America Slashes U.S. GDP Forecast Again: -1.2%

Bank of America thinks the U.S. economy shrank for a second consecutive quarter as consumer spending softened.

“In recent weeks, data surprises relative to our forecast have generally been to the downside and suggest the US economy has likely contracted in the first half of the year,” the bank’s economists wrote in a client note.

The economists reduced their estimate for second-quarter GDP from a zero rate of growth to minus 1.2 percent. This is the second time the bank cut its estimate in just the past two weeks. In late June, the bank saw the U.S. economy growing at a 1.5 percent rate in the April through June period.

“Much of the decline is due to large negative contributions from trade and inventories – historically volatile components – but final sales has also slowed,” the economists said.

The bank said that its own card data points to a 0.5 percent gain in retail spending, less than the one percent gain the bank expects for the Consumer Price Index.

“Record-high gas prices would have supported total spending, but the card data suggest they are increasingly weighing on spending in other categories,” the bank’s economists wrote. “Given the strength in inflation, there is a risk that real consumer spending contracted for the second consecutive month in June.”