third and fourth quarter growth is predicted to fall

Despite the solid economic growth pace, the outlook for the second half of the year is hazy. The labor market is slowing, which will impact wage gains. Though wages rose, income at the disposal of households after adjusting for inflation and taxes increased more slowly last quarter, rising at a 1.0% rate after climbing at a 1.3% pace in the first quarter. That meant consumers turned to savings and also saved less to fund their spending last quarter. The saving rate fell to 3.5% from 3.8% in the January-March period and is now well below its pre-pandemic average. Economists also estimate that much of the Fed's rate hikes is still to be felt. State and local government revenues are also slowing, which could erode spending. There are also worries about new tariffs, which could see businesses front-loading imports if former President Donald Trump is returned to the White House in November's presidential election. Nonetheless, a recession is not expected, with monetary policy easing anticipated this year. "Economic activity is indeed about to downshift into a below potential path in the second half of the year," said Scott Anderson, chief U.S. economist at BMO Capital Markets.