US economy picks up steam despite expectations of slowdown

US economy picks up steam despite expectations of slowdown

US GDP growth hit 2.4 percent in the second quarter, despite expectations it would slow from two percent in the first quarter
US GDP growth hit 2.4 percent in the second quarter, despite expectations it would slow from two percent in the first quarter. Photo: JOE RAEDLE / GETTY IMAGES NORTH AMERICA/Getty Images via AFP/File
Source: AFP

The US economy defied expectations to see growth pick up in the second quarter, according to government data released Thursday, supported by business investment and resilient consumer spending.

GDP growth in the world's biggest economy came in at an annual rate of 2.4 percent for the April-June period, said the Commerce Department, despite analyst expectations of a slower rate.

This was also an increase from the two percent rate in the first three months of 2023.

Although economists have been warning of a potential slowdown as the US central bank raised interest rates rapidly in the past year to tamp down demand and lower inflation, the economy has proven more resilient than expected.

In the first quarter, GDP growth was revised sharply higher to two percent -- from an initial estimate of 1.1 percent –- boosted by a stronger-than-anticipated consumer.

Read also

ECB to mark year of hikes with inflation still high

On Thursday, the rise in GDP "reflected increases in consumer spending, nonresidential fixed investment, state and local government spending" and other areas, said the Commerce Department in a statement.

PAY ATTENTION: Follow Briefly News on Twitter and never miss the hottest topics! Find us at @brieflyza!

But while there was an "upturn in private inventory investment and an acceleration in nonresidential fixed investment," contributing to the acceleration in GDP growth, this was partly offset by a downturn in exports and decelerations in consumer spending as well as in government spending.

'Positive trajectory'

Some analysts think the United States could see a mild recession in the second half of the year but this likelihood appears to be diminishing on data pointing to a strong labor market and low unemployment -- while inflation eases.

On Wednesday, Federal Reserve chair Jerome Powell told reporters that his staff is no longer forecasting a recession although they still see a "noticeable slowdown in growth starting later this year."

Read also

US Federal Reserve likely to lift interest rates to 22-year high

This came after the Fed raised the benchmark lending rate for an 11th time since March 2022.

"Growth is outpacing expectations even as the monetary policy stance has become restrictive," said Rubeela Farooqi, chief US economist at High Frequency Economics.

"A strong household sector that continues to benefit from positive job growth and rising real incomes should keep growth on a positive trajectory this year," she added.

As inflation cools, "real wage growth is turning positive," providing a tailwind to consumer spending, said Gregory Daco, chief economist at EY-Parthenon, in a note this week.

But the economy "continues to face significant headwinds from persistently elevated prices and costs, tightening credit conditions and rising interest rates," he warned. "Union strikes, student loan repayments and corporate debt vulnerabilities also represent downside risks."

PAY ATTENTION: Сheck out news that is picked exactly for YOU ➡️ click on “Recommended for you” and enjoy!

Source: AFP

Authors:
AFP avatar

AFP AFP text, photo, graphic, audio or video material shall not be published, broadcast, rewritten for broadcast or publication or redistributed directly or indirectly in any medium. AFP news material may not be stored in whole or in part in a computer or otherwise except for personal and non-commercial use. AFP will not be held liable for any delays, inaccuracies, errors or omissions in any AFP news material or in transmission or delivery of all or any part thereof or for any damages whatsoever. As a newswire service, AFP does not obtain releases from subjects, individuals, groups or entities contained in its photographs, videos, graphics or quoted in its texts. Further, no clearance is obtained from the owners of any trademarks or copyrighted materials whose marks and materials are included in AFP material. Therefore you will be solely responsible for obtaining any and all necessary releases from whatever individuals and/or entities necessary for any uses of AFP material.