US Economy Surprises With Growth Of 2.4% In Q2, Accerelates Despite Fed Hikes

US economy has grown merrier-than-expected in the second quarter of 2023. The country's gross domestic product (GDP) recorded a growth of 2.4% in Q2, which is higher than 2% from the previous quarter, and also above market's expectations of 1.8%. The upside primarily reflected an uptick in private inventory investment and non-residential fixed investment

The economy accelerated owing to increases in consumer spending, nonresidential fixed investment, state and local government spending, private inventory investment, and federal government spending. These offset the decreases in exports and residential fixed investment.

ALso, imports, , which are a subtraction in the calculation of GDP, decreased.

According to the Bureau of Economic Analysis, the increase in consumer spending reflected increases in both services and goods. Within services, the leading contributors to the increase were housing and utilities, health care, financial services and insurance, and transportation services. Within goods, the increase was led by recreational goods and vehicles as well as gasoline and other energy goods. The increase in nonresidential fixed investment reflected increases in equipment, structures, and intellectual property products. The increase in state and local spending reflected increases in compensation of state and local government employees and gross investment in structures. The increase in private inventory investment reflected increases in both farm and nonfarm inventories.

Notably, compared to the first quarter, the acceleration in GDP in the second quarter primarily reflected an upturn in private inventory investment and an acceleration in nonresidential fixed investment. These movements were partly offset by a downturn in exports, and decelerations in consumer spending, federal government spending, and state and local government spending. Imports turned down.

Furthermore, in Q2 of 2023, current-dollar GDP increased 4.7 percent at an annual rate, or $305.2 billion, in the second quarter to a level of $26.84 trillion. In the first quarter, GDP increased 6.1 percent, or $391.8 billion.

Also, the price index for gross domestic purchases increased 1.9 percent in the second quarter, compared with an increase of 3.8 percent in the first quarter (table 4). The PCE price index increased 2.6 percent, compared with an increase of 4.1 percent. Excluding food and energy prices, the PCE price index increased 3.8 percent, compared with an increase of 4.9 percent.