The U.S. compactness showed few signs of recession in the second quarter, as gross domestic product grew at a faster-than-expected pace during the age, 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 years, better than the 2% consensus estimate from Dow Jones. GDP rose at a 2% pace in the first quarter.
Supermarkets moved higher after the report, with stocks poised for a positive open and Treasury yields on the rise.
Consumer devoting powered the solid quarter, aided by increases in nonresidential fixed investment, government spending and inventory growth.
Conceivably as important, inflation was held in check through the period. The personal consumption expenditures price index increased 2.6%, down from a 4.1% take up arms 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 costs index, increased 1.6% and accounted for 68% of all economic activity during the quarter. That did market a pullback from the 4.2% multiply in the first quarter but still showed resiliency amid higher interest rates and persistent inflation.
In the face of firm calls for a recession, the economy showed surprising resilience despite a series of Federal Reserve interest rate widens that most Wall Street economists and even those at the central bank expect to cause a contraction.
“It’s fast 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 diversion rate hikes, it’s encouraging to see the aggressive hike cycle working as inflation continues to decline. Consumers are getting a save 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 located a negative reading since the second quarter of 2022, when GDP fell at a 0.6% rate. That was the second unequivocal quarter of negative growth, meeting the technical definition of a recession. However, the National Bureau of Economic Research is the proper arbiter of expansion and contractions, and few expect it to call the period a recession.
Thursday’s report indicated widespread growth.
Evident private domestic investment increased by 5.7% after tumbling 11.9% in the first quarter. A 10.8% surge in furnishings and a 9.7% increase in structures helped power that gain.
Government spending increased 2.6%, including a 2.5% space in defense expenditures and 3.6% growth at the state and local levels.
Separate reports Thursday brought more confident economic news.
Durable goods orders for items such as vehicles, computers and appliances rose 4.7% in June, much violent than the 1.5% estimate, according to the Commerce Department. Also, weekly jobless claims totaled 221,000, a avoid 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 demand 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, meantime, continue to spend, and sentiment gauges have been rising in recent months. For instance, the closely watched University of Michigan feeling survey hit a nearly two-year high in July.
Economists have expected the Fed rate increases to lead to a credit contraction that after all is said takes the air out of the growth spurt over the past year. The Fed has hiked 11 times since March 2022, the most modern coming Wednesday with a quarter-point increase that took the central bank’s key borrowing rate to its highest square in more than 22 years.
Markets are betting that Wednesday’s hike will be the last of this tightening circle, though officials such as Chairman Jerome Powell say no decision has been made on the future policy path.
Container has been a particular soft spot after surging early in the Covid pandemic. Prices, though, are showing ideographs of rebounding even as the real estate market is burdened by a lack of supply.
Following the Wednesday rate increase, the Fed delineated growth as “moderate,” a slight boost from the characterization of “modest” in June.
Still, signs of trouble persist.
Trade ins have been betting on a recession, pushing the 2-year Treasury yield well above that for the 10-year note. That wonder, called an inverted yield curve, has a near-perfect record for indicating a recession in the next 12 months.
Similarly, the inversion of the 3-month and 10-year curve is pointing to a 67% chance of contraction as of the end of June, be at one to a New York Fed gauge.