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Economic News

United States: Real GDP Growth Picks Up

July 25, 2024
Marc-Antoine Dumont
Senior Economist

Highlights

  • According to the advance estimate released by the U.S. Bureau of Economic Analysis, real GDP increased at an annualized rate of 2.8% in the second quarter of 2024. This comes on the heels of gains of 1.4% in the first quarter and 3.4% in the fourth quarter of 2023.
  • Meanwhile, final domestic demand grew at an annualized rate of 2.7% in the second quarter. The change in business inventories added 0.8 percentage points to real GDP growth.

Comments

After a comparatively modest start to the year, real GDP growth picked up in the second quarter, coming in at an annualized 2.8% and well above the consensus forecast of 1.9%. Even without the contribution from business inventories, real GDP grew 2%.

The US economy continues to perform well. In fact, final domestic demand grew by an annualized 2.7%, which isn't exactly a sign of a struggling economy. Higher real consumption of durable and nondurable goods—which rose 4.7% and 1.4% respectively—is particularly noteworthy. Real business investment also ramped up, especially in equipment, which saw its strongest growth since the fourth quarter of 2020 with an 11.6% gain. This comes on the heels of the surge in investment in nonresidential buildings in 2023.

Strong domestic demand also buoyed real imports, which posted an annualized gain of 6.9%. Meanwhile, real exports increased by an annualized 2%, limiting the drag from the external sector. 

Implications

The pace of US real GDP growth could complicate the Federal Reserve's job. Although inflation has slowed in recent months, the US economy continues to grow quickly enough to fuel inflationary pressure. The Fed is unlikely to make a move this summer and will probably wait until at least September to start cutting rates. We'll have a clearer picture of inflationary pressure tomorrow when the monthly PCE deflator data is released.

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