Category Archives: Dept of Commerce

The slowdown that wasn’t

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Economists anticipated lackluster economic growth last quarter. Instead, growth surged, a sign of the still-resilient economy.

Why it matters: 

The soft landing was very much intact this spring: Price pressures eased, but not at the expense of the strong economy and labor market.

What they’re saying: 

“While these estimates will be revised a few times, they do point to the continued strength of the U.S. economy despite the high interest rate environment we’ve been in for over a year,” NerdWallet senior economist Elizabeth Renter wrote this morning.

The big picture: 

The economy grew at an annualized 2.8% in the second quarter, up from the modest gain of 1.4% at the start of 2024.

  • The consumer was the key driver of last quarter’s strong economic growth. Personal consumption expenditures increased at a 2.3% annualized rate, gaining from the 1.5% pace in the prior period. That category contributed 1.6 percentage point to the increase in GDP figure.
  • Another big contributor to growth: Businesses stocked up inventories at a strong rate, adding 0.8 percentage point to GDP. Given that consumer spending was so brisk last quarter, the stocking was likely to keep up with current demand — not to make up for prior shortfalls.

Capital spending rose at a 5.2% annualized rate, reflecting a surge in spending on equipment (+11.6%) and continued investment in intellectual property (+4.5%).

  • The jump in spending on equipment and intellectual property “affirms our conjecture that the American economy is in the midst of a productivity boom that in turn will result in an improved standard of living across the economy for all cohorts,” RSM economist Joe Brusuelas wrote in a note.

Between the lines: 

A narrower measure of growth affirms the economy’s resiliency in the second quarter.

  • Final domestic private sector sales — which strips out volatile categories like inventory shift, government spending and trade — increased at a 2.6% annualized rate, the same as the previous quarter.

The intrigue: 

The second quarter saw strong growth alongside lower inflation — a reversal of dynamics observed in the January to March period, when inflation resurged and headline GDP moderated.

  • Still, other indicators point to potential risks for the economy. The unemployment rate has risen in recent months to 4.1%, the highest since 2021. Should the labor market lose steam, that could slow consumer spending and crimp the economy.

What to watch: 

The Federal Reserve holds a policy meeting next week. No rate changes are expected, though officials look likely to lay the groundwork for a rate cut in the fall.

U.S. economy surprises with strong 2.8% growth rate in second quarter

Posted on by • Posted in 2024 Election Issues, Dept of Commerce, Economic Growth, Economic Indicators, Economic Outlook, Economy, Federal Reserve, Gross Domestic Product (GDP), Inflation, Soft Landing, State of the Union • Leave a comment
https://www.axios.com/2024/07/25/gdp-report-q2-us-economy?stream=top&utm_source=alert&utm_medium=email&utm_campaign=alerts_all

The U.S. economy grew at a 2.8% annualized rate in the second quarter—a faster rate than economists expected as consumer spending increased and businesses built up inventories, the Commerce Department said on Thursday.

Why it matters:

The new data raises confidence the economy has achieved a “soft landing” — healthy economic growth alongside cooling inflation.

  • Economists expected an annualized growth rate of 1.9% last quarter. The economy grew at a 1.4% rate in the first three months of the year.

Driving the news:

The accelerated growth stemmed from a jump in inventory investment and consumer spending.

  • Companies also increased spending on equipment and intellectual property. That was partly offset by a slump in housing, the government said.
  • Personal consumption expenditures rose at a 2.3% annualized rate last quarter, up from the 1.4% in the first quarter.
  • Consumer spending contributed 1.6% to the rise in GDP, while private inventories added 0.82 percentage point.

The big picture:

Gloomy forecasts of a recession over the past year have not come to pass.

  • The Federal Reserve raised interest rates to the highest in two-decades to restrain growth and bring down inflation—raising expectations those actions would tip the economy into a sharp slowdown.
  • Fed officials have cautiously suggested the economy has achieved a soft landing as inflation dissipates.
  • The central bank is expected to keep rates on hold at the policy meeting next week and set the table for a rate cut in September.

The bottom line:

The economy continues to defy expectations of a slowdown.

U.S. economy expands at 2.9% annual rate in fourth quarter

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https://www.axios.com/2023/01/26/gdp-fourth-quarter-economy?stream=top&utm_source=alert&utm_medium=email&utm_campaign=alerts_all

The U.S. economy grew at an annualized 2.9% rate in the final months of 2022, the Commerce Department said on Thursday.

Why it matters:

Economists are bracing for a significant slowdown in economic activity as the Federal Reserve’s interest rates hikes take hold, but that certainly wasn’t the case in the final months of last year.

  • Economists expected the Gross Domestic Product figures to show the economy grew at a 2.6% annualized rate last quarter, after expanding at a 3.2% pace in the prior quarter.

Details:

Consumer spending and businesses built up private inventories gave GDP the biggest boost. Among the biggest drags: fixed investment, a category that includes housing.

By the numbers:

Over the calendar year, GDP grew by 2.1% in 2022 — a decent pace, especially considering the historically aggressive rate hikes by the Federal Reserve that sought to restrain economic activity to contain inflation.

  • Those rate hikes hit the housing sector particularly hard, which dragged down overall growth earlier last year.

Catch up quick:

The first half of 2022 was dogged by fears that the economy had entered a recession, after back-to-back quarters of contractions. But by the second half of the year, the economy had returned to growth mode.

  • The growth over 2022 was an expected slowdown from the 5.9% achieved in 2021, when the economy bounced back from the pandemic shock.

U.S. economy returned to growth in Q3

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https://www.axios.com/2022/10/27/us-gdp-third-quarter-report?stream=top&utm_source=alert&utm_medium=email&utm_campaign=alerts_all

The U.S. economy expanded at a 2.6% annual rate in the third quarter, ending the streak of back-to-back contractions that raised fears the country had entered a recession.

Why it matters: Gross domestic product got a boost from trade dynamics, but the underlying details — including weaker housing and decelerating consumer spending — point to an economy that’s slowing.

  • The first estimate of GDP, released by the Commerce Department on Thursday, will be revised in the coming months as the government gets more complete data.
  • The report comes on the heels of negative GDP growth during the first half of the year. In the January through March period, the economy contracted at a 1.6% annual rate. In the second quarter, the economy shrank at a 0.6% annualized pace.

Between the lines: The latest GDP report is among the final major economic data releases before the midterm elections, where voters have ranked the economy as a critical issue.

  • The labor market is solid, with the unemployment rate at the lowest level in over 50 years. But soaring inflation has eaten away at Americans’ wage gains.

The backdrop: The Federal Reserve is trying to engineer an economic slowdown in a bid to crush high inflation. It has swiftly raised borrowing costs five times this year, with another big increase likely ahead at its upcoming policy meeting next week.

What they’re saying: “For months, doomsayers have been arguing that the US economy is in a recession and Congressional Republicans have been rooting for a downturn,” President Biden said in a statement. “But today we got further evidence that our economic recovery is continuing to power forward.”