US Economy Surges: GDP Growth Hits 2.8% in Q2

GDP Growth

The U.S. economy showed accelerated growth in the second quarter of 2024, with real GDP increasing at an annual rate of 2.8%, up from 1.4% in the first quarter. This growth was primarily driven by increases in consumer spending, private inventory investment, and nonresidential fixed investment. Consumer spending rose in both services and goods sectors, with notable contributions from health care, housing, and motor vehicles. The acceleration compared to Q1 was mainly due to an upturn in private inventory investment and faster consumer spending growth, partially offset by a downturn in residential fixed investment.

Inflation and Personal Income

Inflation, as measured by the PCE price index, moderated to 2.6% from 3.4% in Q1, while core PCE (excluding food and energy) also slowed to 2.9% from 3.7%. Personal income and disposable income continued to grow, albeit at a slower pace than in Q1. The personal saving rate declined slightly to 3.5% from 3.8% in the previous quarter.

Labor Market

The labor market showed signs of resilience, with initial jobless claims decreasing by 10,000 to 235,000 for the week ending July 20. The four-week moving average, which smooths out weekly volatility, increased slightly by 250 to 235,500. The insured unemployment rate remained steady at 1.2%, while continuing claims decreased by 9,000 to 1,851,000. The four-week moving average for continuing claims rose to 1,853,500, reaching its highest level since December 2021.

Durable Goods Orders

Durable goods orders in June presented a mixed picture. Headline new orders for manufactured durable goods decreased significantly by 6.6% to $264.5 billion, breaking a streak of four consecutive monthly increases. This decline was primarily driven by a 20.5% drop in transportation equipment orders.

However, excluding the volatile transportation sector, core durable goods orders actually increased by 0.5%, indicating some underlying strength in manufacturing demand. When excluding defense orders, new orders fell by 7.0%.

Conclusion

These reports paint a picture of an economy experiencing moderate growth with some areas of strength and others showing potential signs of softening. The GDP growth acceleration and steady labor market suggest overall economic resilience, while the mixed durable goods report and slight uptick in the four-week average of jobless claims warrant continued monitoring. The moderation in inflation indicators may provide some relief to policymakers, but the overall economic landscape remains complex and subject to various internal and external factors.