U.S. Economy Grew at Brisk 2.8% Rate in Second Quarter
Wall Street Journal
By Harriet Torry
Updated July 25, 2024 9:52 am ET
The U.S. economy accelerated in the second quarter as consumers increased their spending, businesses invested more in equipment and stocked inventories, and inflation cooled.
Gross domestic product—the value of all goods and services produced in the U.S., adjusted for inflation and seasonality—rose at an annual rate of 2.8% for April through June, the Commerce Department said Thursday. That was more than the 1.4% rate during the first quarter, and well above the 2.1% rate economists had expected before the report.
Household spending, the main driver of the U.S. economy, increased at a 2.3% rate in the second quarter, picking up from 1.5% in the first. Spending on goods increased while services spending moderated slightly.
The report shouldn’t change the outlook for the Federal Reserve’s next moves. Officials have signaled that they expect to hold interest rates steady at their meeting next week but could cut at their subsequent meeting, in September, if inflation continues to cool.
Thursday’s report is one of the last major readings of the economy’s temperature that Fed officials will see before next week’s meeting. The report suggests the U.S. economy remains on solid footing.
“The sharper-than-expected pickup in second-quarter GDP growth to 2.8% annualized should make the Fed a bit more comfortable about keeping policy unchanged next week, but the recent loosening of labor market conditions and signs of slower price growth still mean that there is a strong case for a cut at the following meeting in September,” Stephen Brown, an economist at Capital Economics, said in a note to clients.
The pickup in consumer and business spending offset negative developments such as a decline in spending on residential investment. The spring home-buying season, usually the busiest time of year for the housing market, was a dud thanks to high prices and elevated mortgage rates. Sales of existing homes declined in June for the fourth straight month, but prices hit a record, locking out many would-be buyers.
A key category of business spending picked up: Nonresidential fixed investment, reflecting spending on commercial construction, equipment and software, rose at a 5.2% rate. Capital expenditures were led by 11.6% growth in spending on equipment, while spending on structures declined.
Excluding volatile food and energy prices, the personal-consumption expenditures price index rose 2.9% in the second quarter at an annualized rate, cooling from 3.7% in the first quarter.
Stocks were muted shortly after the opening bell, with the S&P 500 flat and the Dow Jones Industrial Average slightly higher.
By Harriet Torry
Updated July 25, 2024 9:52 am ET
The U.S. economy accelerated in the second quarter as consumers increased their spending, businesses invested more in equipment and stocked inventories, and inflation cooled.
Gross domestic product—the value of all goods and services produced in the U.S., adjusted for inflation and seasonality—rose at an annual rate of 2.8% for April through June, the Commerce Department said Thursday. That was more than the 1.4% rate during the first quarter, and well above the 2.1% rate economists had expected before the report.
Household spending, the main driver of the U.S. economy, increased at a 2.3% rate in the second quarter, picking up from 1.5% in the first. Spending on goods increased while services spending moderated slightly.
The report shouldn’t change the outlook for the Federal Reserve’s next moves. Officials have signaled that they expect to hold interest rates steady at their meeting next week but could cut at their subsequent meeting, in September, if inflation continues to cool.
Thursday’s report is one of the last major readings of the economy’s temperature that Fed officials will see before next week’s meeting. The report suggests the U.S. economy remains on solid footing.
“The sharper-than-expected pickup in second-quarter GDP growth to 2.8% annualized should make the Fed a bit more comfortable about keeping policy unchanged next week, but the recent loosening of labor market conditions and signs of slower price growth still mean that there is a strong case for a cut at the following meeting in September,” Stephen Brown, an economist at Capital Economics, said in a note to clients.
The pickup in consumer and business spending offset negative developments such as a decline in spending on residential investment. The spring home-buying season, usually the busiest time of year for the housing market, was a dud thanks to high prices and elevated mortgage rates. Sales of existing homes declined in June for the fourth straight month, but prices hit a record, locking out many would-be buyers.
A key category of business spending picked up: Nonresidential fixed investment, reflecting spending on commercial construction, equipment and software, rose at a 5.2% rate. Capital expenditures were led by 11.6% growth in spending on equipment, while spending on structures declined.
Excluding volatile food and energy prices, the personal-consumption expenditures price index rose 2.9% in the second quarter at an annualized rate, cooling from 3.7% in the first quarter.
Stocks were muted shortly after the opening bell, with the S&P 500 flat and the Dow Jones Industrial Average slightly higher.
