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Not so long ago major economic forecasts such as the GDPNow forecast from the Atlanta Federal Reserve Bank were calling for second quarter U.S. GDP to grow at an annual rate of better than 4%. That was extraordinarily strong growth and it fit in with forecasts from Wall Street analysts for better than 20% earnings growth for the companies in the Standard & Poor’s 500 index during the quarter. Needless to say (but I’ll say it anyway) those two numbers fed into a belief that we would see a summer rally on earnings reports.

Now, however, those GDP forecasts are coming back to earth. The Atlanta Fed’s most recent GDPNow forecast, that for July 2, is looking for annual real (that is after subtracting inflation) GDP growth of just 4.1%. That’s a recovery from the 3.8% forecast on June 29 but a big dip from the 4.5% forecast of June 27 and 4.8% on June 14. The forecast from the New York Fed fell to 2.79% from 2.87% in this period. The forecast from the St. Louis Fed is pointing at 3.54% growth.

I’d point out that these forecasts are all very solid in the context of the below trend growth in this recovery. But they are lower than the blowout projections of just a few weeks ago.

The big culprit in this retreat in forecasts has been the weakness in consumer spending in the latest economic reports. In May consumer spending rose by just 0.2% from April, instead of the expected 0.4%. Statisticians also lowered their read on April consumer spending to 0.5% from 0.6%. In the past few quarters personal income has been growing faster than personal spending. That has driven an increase in the savings rate to 3.2% in May from 3% in April and 2.4% in December. It’s not a bad thing when consumers save rather than spend but it does cut into the growth rate in the U.S. economy since consumer spending accounts for roughly 70% of U.S. GDP.

The first reading on second quarter GDP will be released on the morning of Friday, July 23.