In the second quarter of 2024, the United States saw a better-than-expected growth in Gross Domestic Product (GDP) and consumer spending, indicating a steady economic recovery while inflation remains persistent.
Following the release of the data, the three major U.S. stock index futures showed a muted performance, with the S&P 500 index holding steady and the Dow Jones Industrial Average edging up slightly.
According to the preliminary estimate released by the U.S. Department of Commerce on Thursday, the annualized growth rate of the U.S. GDP for the second quarter stood at 2.8%, significantly surpassing the previous value of 1.4%. This figure also exceeded the economists’ estimate of 2.1% from an earlier Dow Jones survey.
The robust GDP growth in the second quarter was mainly driven by increases in consumer spending, private inventory investment, and non-residential fixed investment.
Personal consumption expenditure rose by 2.3% in the second quarter, up from 1.5% in the first quarter. While spending on goods increased, the pace of spending on services slowed slightly.
During the second quarter, the rebound in consumer and business spending offset the decline in residential investment and other negative factors. Typically, spring is the busiest season for the real estate market, but due to high home prices and rising mortgage rates, the housing market in the second quarter was less than ideal. Existing home sales in June marked the fourth consecutive monthly decline as many potential buyers found themselves priced out of the market.
On a positive note, non-residential fixed investment, which reflects spending on commercial buildings, equipment, and software, rebounded in the second quarter, growing by 5.2%. Within capital expenditure, spending on equipment increased by 11.6%, while spending on structures declined.
The data released on Thursday is one of the final key economic indicators that Federal Reserve officials will consider before their upcoming policy meeting. The economic growth report underscores the solid foundation of the U.S. economy.
The Wall Street Journal noted that Thursday’s economic data is unlikely to alter the Fed’s outlook on future actions. Fed officials have hinted at maintaining interest rates at the upcoming meeting next week. However, if inflation continues to cool down, they may consider cutting rates at the subsequent meeting in September.
The core Personal Consumption Expenditures Price Index (PCE) for the second quarter came in at an annualized rate of 2.9%, showing a slight slowdown from the previous figure of 3.7%. The PCE price index excludes the more volatile prices of food and energy.
Overall, despite the positive performance of the U.S. economy under the backdrop of higher interest rates and easing inflation, many ordinary individuals are feeling dissatisfied with the significant increase in prices of groceries, vehicles, and real estate compared to previous years.
While predictions of an economic recession have subsided, there are signs of softness in the economy.
Firstly, although the unemployment rate remains historically low, the pace of job creation by employers in the second quarter has slowed compared to the first quarter.
Secondly, several corporations have warned that consumers’ purchasing power is gradually decreasing.
Data from the Department of Commerce shows that the personal savings rate continues to decline, standing at 3.5% this quarter compared to 3.8% in the first quarter.
A report released by the Federal Reserve Bank of Philadelphia on Wednesday indicated that credit card balances have reached a historical high since 2012. Additionally, revolving debt balances have also hit a new peak, despite banks reporting tightened lending standards and a decrease in new credit card issuances.