GDP Q2 2023: Economy grew at a 2.4% pace in the second quarter, beating estimate
S E E D E D C O N T E N T
Published Thu, Jul 27 2023 8:31 AM EDT
- Gross domestic product rose at a 2.4% annualized pace in the second quarter, topping the 2% estimate.
- Consumer spending powered the solid quarter, aided by increases in nonresidential fixed investment, government spending and inventory growth.
- A Commerce Department inflation gauge increased 2.6%, down from a 4.1% rise in Q1 and well below the estimate for a gain of 3.2%.
The U.S. economy showed few signs of recession in the second quarter, as gross domestic product grew at a faster-than-expected pace during the period, the Commerce Department reported Thursday.
GDP, the sum of all goods and services activity, increased at a 2.4% annualized rate for the April-through-June period, better than the 2% consensus estimate from Dow Jones. GDP rose at a 2% pace in the first quarter.
Markets moved higher after the report, with stocks poised for a positive open and Treasury yields on the rise.
Consumer spending powered the solid quarter, aided by increases in nonresidential fixed investment, government spending and inventory growth.
Perhaps as important, inflation was held in check through the period. The personal consumption expenditures price index increased 2.6%, down from a 4.1% rise in the first quarter and well below the Dow Jones estimate for a gain of 3.2%.
Consumer spending, as gauged by the department's personal consumption expenditures index, increased 1.6% and accounted for 68% of all economic activity during the quarter. That did market a pullback from the 4.2% increase in the first quarter but still showed resiliency amid higher interest rates and persistent inflation.
In the face of persistent calls for a recession, the economy showed surprising resilience despite a series of Federal Reserve interest rate increases that most Wall Street economists and even those at the central bank expect to cause a contraction.
"It's great to have another quarter of positive GDP growth in tandem with a consistently slowing inflation rate," said Steve Rick, chief economist at TruStage. "After yesterday's resumption of interest rate hikes, it's encouraging to see the aggressive hike cycle working as inflation continues to decline. Consumers are getting a reprieve from the rising costs of core goods, and the U.S. economy is off to a stronger start to the first half of the year."
Growth hasn't posted a negative reading since the second quarter of 2022, when GDP fell at a 0.6% rate. That was the second straight quarter of negative growth, meeting the technical definition of a recession. However, the National Bureau of Economic Research is the official arbiter of expansion and contractions, and few expect it to call the period a recession.
Thursday's report indicated widespread growth.
Gross private domestic investment increased by 5.7% after tumbling 11.9% in the first quarter. A 10.8% surge in equipment and a 9.7% increase in structures helped power that gain.
Government spending increased 2.6%, including a 2.5% jump in defense expenditures and 3.6% growth at the state and local levels.
Separate reports Thursday brought more positive economic news.
Durable goods orders for items such as vehicles, computers and appliances rose 4.7% in June, much higher than the 1.5% estimate, according to the Commerce Department. Also, weekly jobless claims totaled 221,000, a decline of 7,000 and below the 235,000 estimate.
Powerful employment gains and a resilient consumer are at the heart of the growing economy.
Nonfarm payrolls have grown by nearly 1.7 million so far in 2023 and the 3.6% unemployment rate for June is the same as it was a year ago. Consumers, meanwhile, continue to spend, and sentiment gauges have been rising in recent months. For instance, the closely watched University of Michigan sentiment survey hit a nearly two-year high in July.
Economists have expected the Fed rate increases to lead to a credit contraction that ultimately takes the air out of the growth spurt over the past year. The Fed has hiked 11 times since March 2022, the most recent coming Wednesday with a quarter-point increase that took the central bank's key borrowing rate to its highest level in more than 22 years.
Markets are betting that Wednesday's hike will be the last of this tightening cycle, though officials such as Chairman Jerome Powell say no decision has been made on the future policy path.
Housing has been a particular soft spot after surging early in the Covid pandemic. Prices, though, are showing signs of rebounding even as the real estate market is burdened by a lack of supply.
Following the Wednesday rate increase, the Fed characterized growth as "moderate," a slight boost from the characterization of "modest" in June.
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Good News!
Biden sticking the soft landing?
Might want to check your source as you have informed us all that inflation dropped.
The 2.6% inflation rate is way down from a year ago, and is approaching the targeted rate...
Like I stated already, best check your sources or amend your claims because this clearly states that inflation increased:
Now, if you don't want me to use your own sources, what should we go by--just your word?
So, which is correct--your claim that inflation is down (it is not, of course, the RATE OF GROWTH WENT DOWN__ DIFFERENT THINGS AS EXPLAINED MANY TIMES NOW) or your source stating the exact opposite?
Have to wonder how much of that GDP rise is due to federal spending. I just got back from a multi-week multi-state vacation and I can state that there is a lot of road construction going on in every state on highways and interstates. Also still rising after having risen to record levels is personal credit-card debt. That really seems to me not a good way to raise the GDP.
I'm all for some good economic news, but simply refuse to ignore persistent inflation just because Biden is President.
While this is somewhat good news, the Feds also raised the interest rate another quarter point yesterday and are talking about another possible hike before the end of the year.
If inflation is truly "in check", why would they need to raise interest rates at all?
For the same reason the GDP is up - people keep spending money.
Not just everyday people. This has a lot to do with it also.....................
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Hello foreign aid..............
So? I don't know how that makes my point any different. Maybe that's what the left means when they say 'Bidenomics'? I don't know. It's money circulating in our markets, that's all I know.
Didn't say it made it different. Just threw it out there as there are a lot of people that don't realize that GovCo spending has a pretty big impact and point in every other direction to fit their "Biden is doing great" narrative
Oh... Okay. Thanks.
Sure. As far as any President on the economy it's mostly - meet the new boss, same as the old boss. But, yes, you are correct when you say government spending is still spending. One politician's pork is another's person's job.
On another note I see the House is having issues getting the Freedom Caucus inline with their new spending bills before they go on break.
Yeah, that's not a good thing. I believe some call this "Bidenomics".