US as second quarter growth hits 3% — enough to beat estimates of 2.6%.
According to the Bureau of Economic Analysis (BEA), the US economy grew at a clip of 3% annualized pace in Q2 2024. This growth blew past Wall Street forecasts and attested to the economy’s resilience against the background of rising interest rates and inflation.
Fears ease over its unescapable recession path amid a better than expected growth in the second quarter of 6.2%.
Third-Quarter GDP Confirmed at 3%Growth: The Bureau of Economic Analysis third estimate of the second-quarter gross domestic product was unrevised from earlier reports and showed an annual growth rate of 3%. Economists had been forecasting a 2.9% rise. It was a jump from 1.4% growth registered in the first quarter itself constitutes a large economic recovery.
Consumer Spending and Business Investment Strong
Second quarter consumer spending, which accounts for more than two-thirds of economic activity, was revised up to 2.8% from the previously reported 2.7%. This was only marginally lower than the first estimated 2.9%. Business investment continued to grow strongly although it eased from recent highs, rising by 8.3%, driven by a surge in equipment investment of up 9.8%.
Unemployment claims unexpectedly below expectations
US Labor Department the week of September 21 dropped to 218,000 new unemployment claims below the expected 223,000. That was the fewest weekly claims since mid-May, suggesting the labor market remained sturdy despite households spending less at restaurants and retailers last month.
Decline in Inflation Keeps Going
The core PCE price index, the Fed’s preferred inflation measure, increased at a 2.5% rate in the second quarter after advancing at a revised 3.0% pace in the first quarter. Core PCE inflation, which strips out volatile food and energy prices, also softened to 2.8% (from the cycle high of 3.7% earlier in the year), signal that underlying price pressures are continuing to moderate.
Code Red: Fed Cuts Interest Rates to Keep Growth Alive
The Federal Reserve lowered interest rates by half a percent last week to keep the economy humming along. Economy “is still in a good place” with solid growth, subdued inflation and strong labor market, Fed Chair Jerome Powell said. The move to cut rates represents the central bank’s resolve to support employment, a painful downturn in which millions of Americans were thrown out of work as the jobless rate hit a post-World War II high, while also beware not to fuel inflation.
Bright Q3 growth prospects
The economy is still expected to ring up solid growth for another quarter amid the challenges of higher borrowing costs and inflation. The Atlanta Fed’s(GDP Now) forecast model upped it prediction for third-quarter growth to a 2.9% annualized pace on Oct. 5, the same expansion rate projected by Goldman Sachs economists, suggesting ongoing steady economic activity through September was lifting overall output.
Business Resilience in Tough Economic Times
Often, the economy is resilient even when the Federal Reserve has raised interest rates — it did so 11 times in 2022 and 2023, to tame the worst inflation in four decades. Inflation has declined from a high of 9.1% last summer to 2.5%, and though hiring has slowed, employers are still adding jobs at a strong pace with an unemployment rate of just 4.2%.
Strong Consumer Spending and Sentiment
Strong consumer spending is shrugged off by economists amid economic headwinds Last moth, Retail sales gained some traction and industrial production rebounded. Consumer sentiment was also on the rise for a third month in September as more people shrugged off sizeable increases in gasoline and food costs to take advantage of lower prices for durable goods, including cars and appliances.
Conclusion
The U.S. economic expansion continues apace, fueled by robust consumer and business spending. While consumer price inflation is still slowing and the jobs market, despite headwinds, has held up fine. And, forecasts indicate an ongoing, albeit slower, period of growth as we head into the third quarter and close out 2019.