GDP revised up for Q2 to 6.6%: What that means for interest rates

The second estimate of the gross domestic product (GDP) for the second quarter of 2021 remained below expectations but rose to 6.6%, according to data released Thursday from the Bureau of Economic Analysis (BEA). This is a slight increase from the advanced estimate’s 6.5%, and up from the first quarter’s 6.3%.

The modest rise was due to upward revisions to nonresidential fixed investments and exports, but was partially offset by downward revisions to private inventory investment, residential fixed investment, and state and local government spending. Imports, which are a subtraction to the GDP calculation, were also revised down.

"The increase in second-quarter GDP reflected the continued economic recovery, reopening of establishments, and continued government response related to the COVID-19 pandemic," the BEA said in its report. "In the second quarter, government assistance payments in the form of loans to businesses and grants to state and local governments increased, while social benefits to households, such as the direct economic impact payments, declined."

If you are struggling due to lower-than-expected economic growth and less government economic stimulus payments, consider taking out a personal loan to help get your finances in order. Borrowers can use a personal loan to help pay off high-interest debt and decrease monthly payments or other needs amid historically low interest rates. Visit Credible to see what kind of rate you could get on a personal loan.

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GDP fails to meet expectations

Falling significantly below expectations in the second quarter, economists began to downwardly revise their growth forecasts for 2021. Mortgage giant Fannie Mae reduced its expectations from 7% economic growth for the full year 2021 down to 6.3%, according to its latest report from its Economic and Strategic Research Group.

The Dow Jones originally forecasted an increase of 8.4% for the second quarter, but after the advanced estimate, it lowered its predictions to 6.7% for the second estimate. But once again, the GDP estimate came in below that prediction.

Jobless claims are also failing to meet expectations, although they are hovering near pandemic-era lows as the job market continues to heal. First-time job filings totaled 353,000 for the week ending on Aug. 21, 2021, which is a slight increase from 349,000 the week before, according to the Labor Department. This is up slightly from the Dow Jones estimate of 350,000. 

The weaker-than-expected economic growth could push the federal reserve to continue its current monetary policy course to avoid rate adjustments. This will keep mortgage rates low and give homeowners more time to refinance their home loans or give homebuyers additional buying power as house prices rise. Currently, the latest data from Freddie Mac shows mortgage rates remain below the 3% mark. Visit Credible to compare multiple lenders at once and find the mortgage interest rate that works best for you.

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Interest rate future is uncertain

Federal Reserve members have increased the probability of raising the federal funds rate by as early as 2022. This will cause interest rates on products such as personal loans, student loans and home loans to rise. 

Despite GDP and the jobs market not meeting expectations, inflation has been strong, worrying some Fed officials. At the Fed’s annual Jackson Hole conference, St. Louis Fed President James Bullard said the Federal Reserve needs to begin moderating inflation. The current inflation rate is 5.4% over the last 12 months, according to the Consumer Price Index (CPI). 

"We do have a new framework we did say that we would allow inflation to run above target for some time, but not this much above target," Bullard said. "So for that reason I think we want to get going on taper. Get the taper finished by the end of the first quarter next year.

"And then we can evaluate what the situation is and we’ll be able to see at that point whether inflation has moderated and if that’s the case we’ll be in great shape," he said. "If it hasn’t moderated, we’re going to have to be more aggressive to contain inflation."

While the Federal Reserve may soon be looking to raise interest rates, they are currently at historic lows. Consumers have taken advantage of these low rates to refinance their mortgage, take out personal loans or even refinance their student loans. If you want to take advantage and obtain a lower annual percentage rate, refinance your student loan into lower monthly payments. Visit Credible to get prequalified without affecting your credit score.

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