The U.S. economy demonstrated robust growth in the second quarter of 2024, with real Gross Domestic Product (GDP) rising at an annual rate of 2.8%, according to the Bureau of Economic Analysis (BEA)’s «advance» estimate. This marks a significant acceleration from the 1.4% growth observed in the first quarter. The increase in GDP was primarily fueled by heightened consumer spending, increased private inventory investment, and growth in nonresidential fixed investment.
Sector Analysis
Consumer spending surged across both services and goods sectors. Health care, housing and utilities, and recreation services led service sector growth, while motor vehicles, recreational goods, furnishings, and gasoline drove increases in goods spending. Private inventory investment saw gains in wholesale and retail trade, partially offset by declines in mining, utilities, and construction. Nonresidential fixed investment was boosted by investments in equipment and intellectual property, despite a downturn in structures.
The acceleration in Q2 GDP growth was largely attributed to an upswing in private inventory investment and faster consumer spending, partially balanced by decreased residential fixed investment. Current-dollar GDP rose by 5.2% annually, adding $360.0 billion to reach $28.63 trillion, outpacing Q1’s 4.5% increase.
Inflation, Consumption and Savings
Inflation indicators showed a moderated pace, with the price index for gross domestic purchases rising 2.3%, down from 3.1% in Q1. The Personal Consumption Expenditures (PCE) price index increased by 2.6%, a slowdown from 3.4% in the previous quarter, while the core PCE price index rose by 2.9%, compared to 3.7% in Q1.
Current-dollar personal income increased by $237.6 billion, driven by higher compensation and personal current transfer receipts. Disposable personal income grew by 3.6%, while real disposable personal income rose by 1.0%. The personal savings rate slightly declined to 3.5% from 3.8% in Q1, with total personal savings amounting to $720.5 billion.
Market Reactions and the Federal Reserve Outlook
Stocks responded positively to the GDP report, with the Dow Jones Industrial Average rising approximately 0.6% and the S&P 500 gaining 0.4%. Despite positive economic indicators, the Federal Reserve is expected to maintain interest rates at their upcoming meeting, with potential rate cuts in September if inflation continues to ease.
While the economy shows resilience, lingering inflation and consumer caution continue to shape the economic landscape. Companies have reported that customers are feeling financial pressures, and this trend is expected to persist. The BEA will release a revised «second» estimate on August 29, 2024, incorporating more complete data.
