The U.S. economy experienced robust growth at a 3% annual rate during the second quarter of 2024, according to the Commerce Department’s final estimate released Thursday. This marks a significant rebound from the 1.6% annual growth rate recorded in the first quarter of the year, driven by strong consumer spending and business investment.
The final figures for the April-June period also highlighted a continued easing of inflation, with the personal consumption expenditures (PCE) index rising at a 2.5% annual rate, down from 3% in the first quarter. Core PCE inflation, which excludes volatile food and energy prices, increased by 2.8%, a decrease from the 3.7% rate observed earlier in the year.
Despite enduring 11 interest rate hikes by the Federal Reserve in 2022 and 2023, aimed at controlling inflation, the U.S. economy has shown remarkable resilience. Annual inflation, which peaked at 9.1% in mid-2022, has since decreased to 2.5%. However, the job market has displayed signs of weakness, with employers adding an average of just 116,000 jobs per month from June through August—the slowest rate since mid-2020.
In response to the persistent drop in inflation and evidence of a sluggish job market, the Federal Reserve recently implemented its first significant rate cut in over four years, lowering the benchmark interest rate by half a point. This move is expected to support sectors sensitive to interest rates, such as housing and manufacturing, and stimulate job growth.
“The economy is in relatively good shape,” said Bill Adams, Chief Economist at Comerica Bank. He anticipates that further rate cuts will boost interest-rate-sensitive sectors and stabilize the unemployment rate.
Consumer spending remained strong, with retail sales rising and industrial production rebounding. Single-family home construction also saw a significant increase from the previous year. Additionally, consumer sentiment improved for the third consecutive month, driven by favorable perceptions of prices for durable goods.
The final GDP estimate for the April-June quarter also included revisions to past GDP growth rates. Over the period from 2018 to 2023, the average annual growth rate was adjusted to 2.3%, up from 2.1%, primarily due to upward revisions in consumer spending. The GDP growth for 2023 was revised to 2.9%, up from the previously reported 2.5%.
The Commerce Department’s next report on GDP growth for the July-September quarter is scheduled for October 30. The Federal Reserve Bank of Atlanta’s forecasting tool predicts a 2.9% annual growth rate for this period.
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