(PatriotWise.com) — The US economy displayed robust performance in the second quarter, registering a 2.4 percent GDP growth, marking four consecutive quarters of positive growth. This expansion indicates the sustained resilience of the US economy.
Expectations among economists, as surveyed by Bloomberg, had been for a 1.8 percent GDP growth. Therefore, the actual 2.4 percent growth came as a pleasant surprise, especially considering recent data suggesting a slowdown in inflation.
The Commerce Department’s figures further affirm the robust state of the US economy. These figures were released a day after the Federal Reserve adjusted its March forecast of a “mild recession” anticipated later in the year.
Three key insights emerge from these numbers.
The ongoing trend of decreasing inflation has persisted as the Federal Reserve continues to elevate interest rates. This is reflected in Thursday’s statistics.
The Personal Consumption Expenditures (PCE) price index rose by 2.6 percent in the second quarter, down from 4.1 percent in the first quarter.
The Fed’s specially observed “core” PCE inflation metric also exhibited a substantial slowdown, dropping to 3.8 percent from the first quarter’s 4.9 percent. This core inflation measure excludes the highly fluctuating categories of food and energy prices influenced by weather and geopolitical events.
Despite the Federal Reserve’s interest rate hikes aimed at moderating an expanding labor market and controlling inflation, recent figures suggest improving worker productivity.
Dean Baker, an economist at the Center for Economic and Policy Research, wrote online, “The second quarter saw a strong productivity growth indicated by a 2.4 percent rise in non-farm business’s value-added, an almost unchanging index for aggregate hours, and a decline in self-employment.”
The solid GDP performance is supported by a surge in factory construction and investments, stimulated by significant subsidy-rich and tax credit-heavy legislation passed during the first half of the Biden administration. These include the Inflation, the CHIPS Act, Reduction Act, and the Infrastructure Investment and Jobs Act.
“GDP growth was robust in the second quarter with a 2.4 percent annual rate. The pattern shows a partial shift with consumption growth moderating to 1.6 percent while fixed investment increased to 4.6 percent,” noted Harvard University economist Jason Furman on Thursday.
Baker added, “The investment boom contributes to the sustained strong growth in the second quarter.”
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