In the second quarter of 2024, the US economy showed a robust growth, recording a 3% increase on an annual basisaccording to revised data from the Commerce Department. This is an improvement over the initial estimate, which pegged gross domestic product (GDP) growth at 2.8% between April and June.
Consumption and investment drive growth
The data are based on a “second estimate” released by the Bureau of Economic Analysis (BEA). These estimates are provisional and could be further revised when the final estimate is released next month. The revision led the growth rate above the 2.8% initially estimated.
The period in question saw a significant acceleration compared to the first three months of the year, during which the economy had grown by only 1.4%. This recovery was mainly driven by consumer spending, which accounts for about 70% of economic activity in the United States. In the second quarter, this item increased by 2.9% annually, a figure revised upward from the 2.3% previously estimated.
At the same time, the investments corporate showed signs of strong vitality, growing at a pace of 7.5%. This was largely supported by a notable 10.8% increase in equipment investment, highlighting business confidence in future economic growth.
Economy solid despite rising interest rates
These data reflect an economy that continues to expand. despite restrictive financial conditions imposed by rising interest rates. Businesses still appear confident in future growth, as evidenced by their investments, while consumers continue to spend, fueling economic expansion.
The economic situation is inevitably intertwined with the political climate, ahead of the presidential election in November. Although inflation has eased from its mid-2022 highs, many Americans are still feeling the strain of high prices, a factor that could influence voter sentiment.
Slowing Inflation: A Challenge for the Federal Reserve
The GDP trend report also provided new data on inflationwhich, while declining, remains slightly above the Federal Reserve’s 2% target. The Personal Consumer Price Index (PCE) rose 2.5% year-on-year in the second quarter, down from 3.4% in the first quarter. Excluding food and energy prices, core inflation came in at 2.7%, also down from the previous quarter.
These numbers suggest that inflation is actually slowing downproviding room for maneuver for the Federal Reserve, which could ease its restrictive monetary policy in the near future. After a series of rate hikes that have brought the cost of money to the highest levels in the last 23 years, a possible interest rate cut is expected as early as September, with the aim of maintaining a balance between controlling inflation and supporting employment.
As inflation slows, the Federal Reserve’s attention has shifted to the job marketwhich has shown signs of slowing in recent months. The unemployment rate has risen to 4.3%, still low by historical standards, and job openings and the pace of hiring have slowed.
The Commerce Department will release its final second-quarter GDP estimate later this month, a figure that will be closely watched by analysts and markets.
