Morning Market Brief
A second estimate from the US Bureau of Economic Analysis showed the US economy grew more than originally estimated. This was owing to an upwardly revised growth in consumer spending. Despite high inflation and borrowing costs, the US consumer is showing resilience, which is helping to prop up the overall economy. Despite the upward revision, it will likely not deter the US Federal Reserve Board (Fed) from lowering interest rates at its next meeting.
- US gross domestic product grew at an annualized pace of 3.0% in the second quarter of 2024, according to a second estimate. This was above the initial estimate of 2.8% growth. It also outpaced the 1.4% expansion in the first quarter.
- The upward revision was driven by higher-than-estimated consumer spending. Consumer spending rose by 2.9% in this second estimate, compared to the initial estimate of 2.3%. The US consumer continues to demonstrate relative resiliency despite challenging financial conditions.
- Conversely, residential investment has been revised downward. Residential investment declined by 2.0% in the second quarter. Real estate market activity has been relatively muted in 2024 amid high mortgage rates and already high home prices.
- While the upward revision was encouraging, economic growth has slowed compared to the growth rate seen at the end of 2023. Growth is expected to remain relatively soft in the quarters ahead.
Initial jobless claims remained elevated over the week ended August 24, indicating a potential slowdown in US economic conditions. The upwardly revised growth likely gives the Fed confidence that the US economy can avoid a hard landing, something it has been striving for in its monetary policy decisions. The Fed still seems poised to begin cutting interest rates this year, possibly as soon as September.
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