The U. S. economy grew faster than expected in the quarter

New Century Advisors Chief Economist Claudia Sahm and Piper Sandler Chief Investment Strategist Michael Kantrowitz discuss whether the economy is on the verge of a recession in the article “Make Money. ”

The U. S. economy grew faster than expected in early 2024 as consumers continued to open their wallets despite persistent inflation and peak interest rates.

Gross domestic product, the broadest measure of goods and output in the broader economy, rose 2. 8% on an annualized basis in the three-month period from April to June, the Commerce Department said Thursday in its first reading of the data.

This is well above the 2% increase forecast by LSEG economists and the 1. 4% speed seen in the first quarter.

“The U. S. economy is much stronger than other people think, and to the extent that markets were worried about slowing growth, they are breathing a sigh of relief after the GDP numbers released this morning,” said Chris Zaccarelli, chief investment officer at the Independent Advisor Alliance. .

FED’S POWELL SAYS OFFICIALS WON’T WAIT FOR INFLATION TO HIT 2% TO CUT RATES

Consumer spending, which accounts for about two-thirds of GDP, saw a sharp increase in the second quarter. It rose from 2. 3% during the period, to 1. 5% recorded in the last quarter, as Americans increased their spending on goods.

Business investment also rose at a rapid pace of 5. 2% in the spring, even as businesses faced hurdles such as peak interest rates.

The businessmen admit that the mandates to return to office were intended to force him to resign.

“GDP doubled from the first quarter as customers spent more than expected and businesses built up inventories hoping customer demand would remain good,” said Robert Frick, business economist at Navy Federal Credit Union. “This is a positive wonder in favor of further expansion. “, but not so much that the Federal Reserve hesitated to cut interest rates. “

An employee polishes a weld on a manufactured part at Liberty Safe Company in Payson, Utah, March 22, 2022 (George Frey/Getty Images/Getty Images).

Despite last quarter’s increase, the economy still appears to be slowing in the face of higher borrowing prices, the highest in more than two decades. Before the Federal Reserve aggressively raised interest rates in 2022 and 2023 to curb inflation, the economic expansion was much greater than it is today.

There are other signs that the expansion is slowing in the face of tighter financial policy. Employment expansion is moderating. The housing market, reliant on emerging interest rates, is stuck in a prolonged slowdown and customer spending has shown signs of stabilizing.

Many consumers remain dissatisfied with the state of the economy, as they continue to feel the impact of emerging costs for critical goods such as rent, food and car insurance. Although inflation has fallen from its peak of 9. 1%, it remains above the Federal Reserve’s 2% target.

“The genuine economy is not as strong as the second-quarter GDP numbers suggest,” said Alfredo Ortiz, executive director of the right-wing Job Creators Network. “In the real world, Americans are still struggling to make ends meet, having to choose between buying gas and buying groceries. “

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Federal Reserve officials have indicated that they are in a position to start cutting interest rates soon amid symptoms of slowing economy and inflation. Investors expect the authorities to make the first cut at their September meeting.

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