The U.S. economy expanded at an estimated 2.4% annualized pace in the second quarter, confounding expectations for a slowdown. Stronger consumer spending amid slowing inflation and a tight labor market helped to propel gross domestic product growth from April to June, the Commerce Department reported Thursday. Also supporting expansion was an increase in business investment, with equipment purchases surging at a 10.8% rate — the most in over a year. Economists surveyed by Bloomberg had forecast GDP would grow an annualized 1.8% in the period, after 2% in the first quarter.
The Federal Reserve, which raised interest rates by a quarter point Wednesday, said its staff economists are no longer forecasting a recession for this year. A recent survey by the National Association for Business Economics shows the majority of respondents see the likelihood of the U.S. entering a recession in the next 12 months at 50% or less.
Economy grew solid 2.4% in second quarter amid easing #recession fears! (Data Source: EquityRT)
The U.S. #economy accelerated unexpectedly to a 2.4% annual #growthrate from April through June, showing continued resilience in the face of steadily higher interest rates resulting from the Federal Reserve’s 16-month-long fight against inflation.
#WallStreet analysts had forecast a 2% increase in gross domestic product, the official scorecard for the economy. #GDP had expanded 2% in the first quarter.
The economy is still expanding in the face of rising interest rates. Because in fighting inflation, which last year hit a four-decade high, the #Fed has raised its benchmark rate 11 times since March 2022, most recently on Wednesday. The resulting higher #costs for a broad range of #loans — from #mortgages and #credit cards to auto loans and business borrowing — have taken a toll on growth.
Yet the economy is unlikely to speed up much until #inflation falls toward the Fed’s 2% target, the #centralbank cuts interest rates and businesses increase spending again. It could be a year or more before that happens.
US economy defies recession fears with strong second-quarter performance.
The U.S. economy grew faster than expected in the second quarter as a resilient labor market supported consumer spending, while businesses boosted investment in equipment and built more factories.
But headwinds remain. Wage growth is slowing as the employment gains cool. Higher borrowing costs could eventually make it harder for consumers, especially low-income households, to fund spending with debt. Banks are tightening credit and excess savings continue to be run down. (Find out more at Reuters: https://reut.rs/3DCffZ2)
Economics Reporter at Quartz Economics Reporter at Quartz (Nathan DiCamillo)
Businesses have been trying to front-run federal government spending that’s being funneled to various parts of the US economy. This resulted in a 7.7% increase in business investment in the second quarter, with the majority of those new funds heading to equipment and structures.
What's more, there's evidence that the weak parts of GDP (consumption and residential investment) are going to rebound in the second half of 2023. This means Q3 and Q4 are also going to see a surge in growth. Analysis in Quartz:
US GDP growth sped past expectations as business investment surged. (🧱THE Q2 GDP REPORT 🧱)
🌍The US economy grew at a 2.4% annualized pace last quarter
💪Consumer spending led growth once again 🏦Business spending grew the most in 6 quarters
😎Hard to have a recession with GDP prints like this 🔥But re-ignited inflation could be a new risk
The US economy is still growing at a healthy pace, and investors are starting to believe it. (https://lnkd.in/e3-t6kzC)
Consumer spending helped carry US GDP, and businesses actually ramped up their investments last quarter. It’s hard to say we’re in – or even near – a recession with this kind of GDP print.
Decent economic data is a reason to feel good about the future, so remember that if you’re doubting this stock market rally.
But now, the risk of higher inflation is becoming more real if consumer spending is as strong as it looks.
It's like a game of whack-a-mole. One mole disappears, another mole pops up.
Stay alert and cautious with prices this high but try not to get over-exposed in either direction.
U.S. #GDP grew at a healthy 2.4% rate in Q2, according to the BEA’s advance estimate. (Tuan Nguyen PhD)
During the period, personal #consumption increased at a 1.6% clip.
These developments have been surprising to those who've been listening to the #economists that had been warning of an impending #recession over the past year.
To be fair, not all economists have been bearish. Some have been pointing to the various forces that have been bolstering growth in the #economy over the past two years.
Three massive forces have fueled the economic expansion for the past two years 💪
U.S. #GDP posted robust growth in Q2, while inflation cooled further. (Theresa Sheehan
Economic Analyst at Econoday)
⚠ Today's data supported a higher chance of a soft landing. Real growth, after being adjusted for #inflation, was 2.4%.
🧊 At the same time, the key inflation metric - core PCE - fell to 3.8% from 4.9% on a quarterly basis, lower than forecasts.
🔈 While the data is backward-looking, what should encourage the proponents of a soft-landing outcome is how robust the spending on equipment/capital goods component was in Q2. The component grew 10.8% in the quarter after declining 8.9% previously.
🔧 That means, despite higher borrowing costs, businesses were not afraid to invest in important capital goods, which should help boost productivity in the longer run.
The upward swing in inventories was also a big driver for GDP growth in Q2. Inventories grew 4,831% after falling 100% in Q1. Residential investment continued to be a drag on GDP, dropping 4.2% in the quarter.
🔺 Compared to the CBO's potential GDP forecasts, we were only about $100 billion away from reaching the goal in Q2.
The advance estimate of second quarter GDP for 2023 is up 2.4% after up 2.0% in the first quarter. The reading is above market expectations and extends a string of GDP reports consistent with moderate expansion begun in the third quarter 2022. The US economy remains resilient and healthy despite the rapid increases in interest rates imposed by the Fed beginning in March 2022. The brief recession in housing has bottomed out and settled down to a sluggish pace. Higher financing costs have not deterred businesses from investing in infrastructure. Consumers continue to spend, in part from less concern about job losses and more confidence in rising household incomes with inflation under better control, at least for food and energy.
An economy cruising along just above the Fed’s longer-run forecast of up 1.8 percent will help Fed policymakers justify the 25-basis point increase in the fed funds target range on July 26. Depending on the tone of the economic data in the intermeeting period until September 19-20, FOMC participants could well be considering the next hike in eight weeks.
The largest positive contribution was from a 1.6 rise in personal consumption expenditures (contribution 1.12) where spending on durables was up 0.4%, nondurables up 0.9%, and services up 2.1%. Spending on services includes rising prices, but also consumers getting out more to shop and travel and enjoy amenities.
The second largest positive contribution was from a 5.7% increase in gross investment (contribution (0.97). Despite higher financing costs, businesses are spending on fixed investments which are up 4.9% in the second quarter. Spending on nonresidential properties was up 7.7% while residential spending was down 4.2%. The housing market remains soft but has recovered from the depths of the slowdown in the third and fourth quarters 2022.
Joseph Hadobas Financial Advisor at Cambridge Investment; Research Financial Advisor at Cambridge Investment Research
The never seems to materialize recession does not deter our brightest economists from assuring us it will arrive and soon. Back half 2022, front half 2023, back half 2023, front half 2024. As sure as night follows day it’s a comin’ around the bend.
Recession, Bull Market, and What Lies Ahead - A Closer Look
In today's financial media, recession-related articles are abundant, warning of an "impending" recession. The interesting part is, we've already experienced a recession, at least technically.
Traditionally, a recession is defined as two consecutive quarters of declining gross domestic product (GDP). Last year in the U.S., this happened early on.
During the first quarter of 2022, U.S. GDP dropped by 1.6%, followed by another 0.9% decrease in the second quarter. According to the standard definition, that qualifies as a recession. However, the government chose a more nuanced perspective, stating that the situation was much more complex than a simple technical recession.
Various factors contribute to a recession, but it remains a fact that two quarters of falling GDP have long been regarded as a recession by financial experts. You can even refer to the Financial Industry Regulatory Authority ("FINRA") for clarification.
Amid the ongoing confusion surrounding this definition, it's crucial to acknowledge that the experts seem to be divided, leaving consumers and businesses in a state of uncertainty. This chaos often distracts from the possibility of a newly born bull market, which could be underway. So, instead of wondering "when" a recession will happen, let's consider the possibility that it may have already occurred. Markets have shown significant growth since then, indicating a positive trend. When risk tolerances go up for companies, the reality will set in that people are still very difficult to find. Instead of waiting for the other shoe to drop, we are planning for what is next with our clients.
The media might continue to fuel confusion and project numerous reasons for an upcoming recession. My advice is to tune out the noise. History tells us that the recession is now in the rearview mirror, and the market is validating this stance.
Let's stay optimistic, as good times may very well be ahead.
They think there is still a 60% chance of recession but a lot of hedging going on.
"Deutsche Bank Vice Chair of Research Peter Hooper and Fannie Mae chief economist Doug Duncan now say it’s essentially a toss-up whether the economy suffers a recession or enjoys a soft landing and keeps growing, though both still believe a downturn is more likely than not.
Nomura Securities International senior economist Aichi Amemiya is also sticking by his firm’s recession forecast, though he added, “it’s getting to be a close call.”
The sentiment was echoed in Bloomberg’s July survey of economists, in which estimates for gross domestic product were revised higher for the second and third quarter. However, forecasters still say there’s a 60% chance the US will fall into recession in the next 12 months."
