The United States economy grew faster than expected during the second quarter, according to new data from the Bureau of Economic Analysis (BEA) released on Thursday.
Per the BEA’s advance estimate of US 2Q gross domestic product (GDP), the economy grew 2.4% at an annualized rate, up from 2% in the first quarter.
Analysts had expected growth of 1.8%, according to a Bloomberg survey.
The increase reflected increases in consumer spending, non-residential fixed investment, state and local government spending, private inventory investment, and federal government spending, partly offset by decreases in exports and residential fixed investments, the BEA said.
ING chief international economist James Knightley said this “Goldilocks” GDP with “not too hot inflation, not too cold growth” feeds into the soft landing narrative for the US economy.
“GDP growth was a little stronger than expected in 2Q 2023, but inflation pressures continue to moderate, supporting the soft landing narrative,” he said.
“The Fed will leave the door open to further rate hikes, but the legacy of past rate hikes and tighter lending conditions will restrain activity and dampen price pressures, negating the need for further action.”
Personal consumption slows
Per the BEA data, personal consumption decelerated quarter-over-quarter from 4.2% to 1.6% in 2Q.
Evelyn Partners investment strategist Nathaniel Casey said that it was probable that consumption would continue to underwhelm in the coming quarters.
“This slowdown in consumption is in line with the latest retail sales data for June, which suggested annualized sales growth is hovering at its lowest rate since the pandemic,” Casey said.
“With wage growth slowing, employment growth easing and student loan payments resuming, real disposable income is likely to remain limited even as price pressures ease.”
Pantheon Macroeconomics chief economist Ian Shepherdson added: “Looking ahead, we see softer consumption 3Q and especially 4Q, when student loan repayments start again, and we think a hefty inventory correction is coming too, sooner or later.”
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