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The US economy grew by 2.8% in the second quarter of 2024, which was stronger than expected. We see this as confirmation of our assessment that the US economy will not slide into recession. Nevertheless, the Federal Reserve is likely to start cutting interest rates in the not too distant future because inflation is easing noticeably, Commerzbank’s economists Dr. Christoph Balz and Bernd Weidensteiner note. Economy expands faster than the trend growth rate “In the second quarter of 2024, the US economy grew by 2.8% (these and all subsequent growth rates are annualized rates of change against the previous quarter). This was even stronger than we had expected (consensus 2.0%, Commerzbank forecast 2.2%). Growth was broad-based (ex. construction). Investments in equipment (+11.6%) and in intellectual property such as software (+4.5%) in particular increased. This may reflect the AI boom.” “The government also increased spending noticeably (+3.1%), as did private consumers (+2.3%). Here, falling inflation supported real disposable income. In contrast, residential construction (-1.4%) and commercial construction (-3.3%) contracted due to high interest rates. In the latter, the impetus provided by various government subsidy programs, such as for the construction of chip factories, is obviously waning.” “The US economy was unable to maintain its very high growth rate in the third (4.9%) and fourth quarters of 2023 (3.4%) this year. However, we had already pointed out in our commentary three months ago that the weaker growth of 1.4% in the first quarter of 2024 was due to one-off factors in inventories and foreign trade and that the underlying pace of growth remains quite high.”     Source: https://www.fxstreet.com/news/us-economy-is-expanding-faster-than-expected-commerzbank-202407251341

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Filed under: News - @ July 25, 2024 6:24 pm