The economic growth rate in the second quarter of the United States exceeds expectations, indicating that demand remains stable under the pressure of high interest rates.
According to the China Wisdom Financial app, the economic growth rate in the second quarter of the United States exceeds expectations, indicating that demand remains stable under the pressure of high interest rates. Preliminary data shows that the US GDP YoY growth was 2.8%, exceeding the market expectations of 2.0%, and the previous quarter was 1.4%. The main growth engine of the US economy, consumer spending, increased by 2.3%, also higher than expected.
The core PCE price index, an inflation indicator that the Fed has been concerned about, rose 2.9% in the second quarter, slower than 3.7% in the first quarter, but still higher than the expected 2.7%.
Under the heavy pressure of high interest rates, consumer spending and more extensive economic activities have cooled down, which helps to gradually suppress inflation.
This is good news for the Fed. The Fed is working to achieve a soft landing for the economy and may start cutting interest rates as early as September. However, it will be a difficult task to cool the labor market just right without causing millions of people to lose their jobs, especially when the unemployment rate has risen for three consecutive months.
After the announcement, US Treasury yields rose slightly. The market expects the Fed will not cut interest rates next week.
Ryan Sweet, an analyst at the Oxford Economics Research Institute, wrote that the economic acceleration should help ease concerns about whether the economy can continue to expand and quell rumors that the Fed needs to cut interest rates in July. Traders continue to expect the Fed to cut interest rates by 25 basis points in September, November and December, while also reducing their bets on further interest rate cuts by the Fed. Previously, traders thought the probability of the Fed cutting interest rates by more than 25 basis points before the September meeting was about 21%, now it has dropped to about 15%.
The driving factors of the US economy.
According to the GDP report, US consumer spending was mainly driven by the rebound in durable goods such as autos and furniture, as well as the moderate growth in service sector spending in the first quarter.
Boosted by defense spending, US government spending contributed more to GDP growth in the first quarter of this year. Housing investment dragged down economic growth for the first time in a year as high mortgage interest rates subdued sales activity and new construction.
Business investment grew at the fastest pace in nearly a year, with equipment investment growing the strongest, marking the fastest growth since early 2022. Another report on Thursday showed that commercial equipment orders in US factories (excluding aircraft and defense equipment) recorded the largest increase since the beginning of last year. This indicates that such spending will continue to promote economic growth in the coming months.