Executive Summary
The Story So Far
Why This Matters
Who Thinks What?
The United States economy expanded at an annualized rate of 3.8% in the second quarter of 2024, from April through June, exceeding earlier projections and marking its fastest pace in nearly two years. This upward revision from the previous estimate of 3.3% was primarily driven by robust consumer spending and a decrease in imports, according to new government data.
Key Economic Drivers
The Commerce Department indicated that this significant growth “reflected a decrease in imports, which are a subtraction in the calculation of GDP, and an increase in consumer spending.” Consumer spending, a key component of economic activity, rose by 2.5% in the year to the end of June, an increase from an earlier estimate of 1.6%.
This acceleration in the second quarter follows a period of contraction earlier in the year, when the US economy shrank at a rate of 0.6% in the first three months of 2024. This initial decline was attributed to companies increasing imports in anticipation of tariffs introduced by President Donald Trump, which subsequently impacted Gross Domestic Product (GDP).
American consumers, often referred to as the engine of the world’s largest economy, have demonstrated resilience despite ongoing tariffs and broader economic uncertainties. Recent data from the Commerce Department revealed that retail sales climbed by 0.6% in August from the previous month, surpassing market expectations.
Labor Market Dynamics
However, this sustained strength in consumer spending, which has defied concerns about an economic slowdown, contrasts with some recent indicators from the labor market. Employers added only 22,000 jobs in August, fewer than anticipated, and the unemployment rate edged up from 4.2% to 4.3%, as reported by the Labor Department.
Despite these figures, other labor market data suggest a more nuanced picture. Initial claims for unemployment insurance decreased last week to their lowest level since July, according to the Labor Department, potentially indicating that the job market may not be as weak as some previous reports suggested.
Expert Perspectives
Bill Adams, chief economist for Comerica Bank, remarked that “the latest economic data are considerably more upbeat than the droopy August jobs report.” He added that “the latest GDP and jobless claims data should ease the bout of anxiety kicked off by the weak August jobs report.”
Lydia Boussour, a senior economist at EY-Parthenon, noted that economic momentum remained steady during the first half of the year, even with increasing policy headwinds. However, Boussour cautioned that “with the impact of tariffs and policy uncertainty becoming increasingly visible, slower US growth and higher inflation are still on the horizon.”
The revised second-quarter GDP figures highlight a stronger-than-expected economic performance, largely fueled by resilient consumer spending and declining imports. While the labor market presents a mixed picture, economists suggest that recent data may alleviate some concerns about a slowdown, even as future challenges related to tariffs and policy uncertainty remain a consideration.
