0.2%P Higher Than Preliminary Estimate (2.8%)
Individual Spending Growth Rate Revised Up from 2.3% to 2.9%
Core PCE Inflation Rate Lowered to 2.8%
The U.S. economy grew by 3% in the second quarter of this year compared to the previous quarter. This is a 0.2 percentage point upward revision from the preliminary estimate (2.8%) released last month. Although concerns about a U.S. economic slowdown have surfaced, the strong consumer spending has helped the U.S. economy continue to show robust growth that still exceeds market expectations.
On the 29th (local time), the U.S. Department of Commerce announced that the real Gross Domestic Product (GDP) for the second quarter of this year grew at an annualized rate of 3% compared to the previous quarter.
This figure is higher than the preliminary estimate (2.8%) announced last month and more than double the first quarter growth rate (1.4%). The U.S. releases economic growth rates in three stages: preliminary, revised, and final estimates. The final estimate will be released at the end of next month.
The increase in the second quarter GDP growth rate was driven by personal spending, the engine of the U.S. economy, which rose significantly more than initially estimated. The personal spending growth rate was revised upward from 2.3% to 2.9%. Spending on goods and services increased mainly in the healthcare, housing, utilities, and leisure sectors.
As the economy continues to rely on consumer spending for growth, inflation has declined, raising expectations for a soft landing.
The core Personal Consumption Expenditures (PCE) price index rose at an annualized rate of 2.8% in the second quarter, a 0.1 percentage point downward revision from last month's figure (2.9%). The core PCE price index, which excludes volatile energy and food prices, is the Federal Reserve's most closely watched inflation gauge. The overall PCE price index's second quarter annualized increase was revised down from 2.6% to 2.5%.
This added confidence to the Fed's assessment that inflation is sustainably slowing toward 2%. Earlier, Fed Chair Jerome Powell, in his speech at the Jackson Hole meeting on the 23rd, mentioned confidence in the inflation slowdown and concerns about labor market cooling, effectively signaling a possible rate cut in September.
The market is focusing on the July PCE price index to be released on the 30th. Last month's PCE prices are estimated to have risen 0.2% month-over-month and 2.5% year-over-year. This would mean that the core PCE price inflation rate has slowed to 2.1% over the past three months, approaching the Fed's target of 2%.
The U.S. labor market appears to remain robust. On the same day, the U.S. Department of Labor reported that initial jobless claims for the week of August 18?24 totaled 231,000, down 2,000 from the previous week (233,000). This was also below the expert forecast of 232,000. Continuing claims, which count those claiming unemployment benefits for at least two weeks, rose by 13,000 to 1,868,000 for the week of August 11?17, compared to the previous week (1,855,000). However, to better understand the labor market trend, the August employment report from the U.S. Department of Labor, due on September 6, should be reviewed.
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