Reporter Cui Puyu
The data released by the Bureau of Economic Analysis of the US Department of Commerce on Thursday showed that the actual gross domestic product (GDP) grew by 2.8% year-on-year in the second quarter, not only much higher than the 1.4% in the first quarter, but also higher than economists' expectations of 2.1%.
The breakdown data shows that consumer spending, enterprise equipment investment, and non residential fixed assets investment are the main reasons for driving GDP growth in the second quarter. Among them, as the main engine of the U.S. economy, consumer spending grew 2.3% on an annualized basis, 0.8 percentage points higher than that in the first quarter, non residential fixed assets investment grew 5.2% on an annualized basis, 0.8 percentage points faster than that in the first quarter, and equipment investment grew 11.6%, 10 percentage points faster than that in the first quarter. However, due to high housing prices and rising mortgage interest rates, the annualized month on month growth rate of private residential investment changed from 16% in the first quarter to -1.4% in the second quarter.
Unlike most countries, the United States uses a quarter on quarter annualized rate to measure economic growth. The advantage of using a quarter on quarter annualized rate is that it amplifies the trend of quarterly economic changes and can better grasp short-term economic fluctuations. Based on traditional year-on-year calculations, the US GDP grew by 3.1% in the second quarter, an increase of 0.2 percentage points from the first quarter.
The inflation data released together showed that the personal consumption expenditure (PCE) price index increased by 2.6% year-on-year in the second quarter, a slowdown of 0.8 percentage points from the first quarter. After excluding volatile food and energy prices, the core PCE index rose by 2.9%, and also fell by 0.8 percentage points compared to the previous value. Core PCE is the most important inflation indicator for the Federal Reserve.
The US Department of Commerce stated in the report that inflation continues to cool down, but the economy remains robust. This report is also one of the last important economic data that the Federal Reserve can see before next week's interest rate meeting. The market generally expects the Federal Reserve to keep interest rates unchanged at 5.25-5.50% at its meeting on July 30-31.
Stephen Brown, an economist at Capital Economics, said in a research report: "The GDP growth rate in the second quarter exceeded expectations, reaching an annualized 2.8%, which should make the Federal Reserve more confident in maintaining policy unchanged next week. However, the recent signs of slowing labor market and price growth mean that the Federal Reserve has sufficient reasons to cut interest rates at its September meeting
According to data from the US Department of Labor, there were 206000 new non farm payroll jobs added in June, a decrease of 12000 from the revised number in May. In addition, as of the week ending July 20th, the number of initial unemployment claims was 235000, a decrease of 10000 from the previous week, but exceeding 220000 for nine consecutive weeks.
Although the GDP growth rate in the second quarter of the United States far exceeded that of the first quarter, it still slowed down compared to the quarter on quarter and quarter on year growth rates of 4.9% and 3.4% in the third and fourth quarters of last year. At the same time, inflation has also significantly cooled down. After the data was released, the Chicago Mercantile Exchange's "Federal Reserve Watch" tool showed a 100% probability of a rate cut in September, but the probability of a rate cut in July was less than 10%. In addition, the probability of cutting interest rates at least once before the end of the year is 98%.
Since July last year, the Federal Reserve has maintained the federal funds rate range at 5.25% -5.5%, the highest level in 23 years. Federal Reserve Chairman Jerome Powell stated in a speech earlier this month that the recent inflation situation has been quite good, "to some extent enhancing our confidence.
He also reiterated that maintaining high interest rates for too long would excessively suppress economic development, and due to the lagged impact of monetary policy, there is no need to wait for inflation to fall to the Federal Reserve's 2% target before cutting interest rates.