Gross domestic product (GDP) levels came in hot in the second quarter, growing at a 2.4 percent rate that marked the fourth straight quarter of positive growth and underlined the resilience of the U.S. economy.
Economists polled by Bloomberg had been expecting GDP growth of around 1.8 percent, meaning the 2.4 percent growth was a pleasant surprise — especially with other recent data indicating slowing inflation.
The numbers from the Commerce Department are the latest sign of strength in the U.S. economy, and they come a day after the Federal Reserve reversed its March prediction of a “mild recession” to hit later this year.
Here are three takeaways on the numbers.
Core inflation falls again
Inflation has been tumbling as the Fed has continued raising interest rates, and Thursday’s figures show this trend continuing.
The personal consumption expenditures (PCE) price index advanced 2.6 percent in the second quarter, down from 4.1 percent in the first.
“Core” PCE inflation — a statistic the Fed pays special attention to — also slowed down considerably, falling to 3.8 percent from 4.9 percent in the first quarter. The core inflation metric removes the more volatile categories of food and energy prices, which are subject to factors like the weather and geopolitical pressures.
Workers are getting more productive
Even as the Fed has raised interest rates to try to take the wind out of a growing labor market to tame inflation, the latest numbers imply that workers are actually getting more productive.
“2.4 percent growth in value added for non-farm business, coupled with near flat index for aggregate hours and drop in self-employment implies strong productivity growth in [the second quarter],” economist Dean Baker with the Center for Economic and Policy Research wrote online.
Investment is picking up
Strong GDP is being bolstered by a boom in factory construction and investment stemming from huge pieces of subsidy- and tax credit-heavy legislation passed during the first half of the Biden administration, including the Inflation Reduction Act, the CHIPS Act, and the Infrastructure Investment and Jobs Act.
“GDP growth was strong in [the second quarter] at a 2.4 percent annual rate. The pattern represents a partial handover with consumption growth moderating (1.6%) while fixed investment picked up (4.6%),” Harvard University economist Jason Furman wrote online Thursday.
“Investment boom sustains strong growth in [the second quarter],” Baker wrote.