Source: Jin10 Data
Author: Yang Large Cap

The latest data shows that the US economy grew at an annualized rate of 3% in the second quarter, consistent with the second estimate, higher than the 1.4% annualized growth rate in the first quarter.

Furthermore, the growth rate of the US economy in 2023 is faster than initially expected, due to significant rate hikes by the Federal Reserve, upgraded corporate investment, and consumer spending. The 2023 US GDP growth rate has been revised to 2.9%, higher than the previous estimate of 2.5%.

The rise in residential investment (including residential construction) also led to this revision. The economic growth rate for 2022 was revised upward by 0.6 percentage points to 2.5%, mainly due to the upward revision of consumer spending and corporate investment.

The annual benchmark data from the US Department of Commerce's Bureau of Economic Analysis (BEA) also shows a significant upward revision in corporate profits last year. The adjustment to inflation is minimal, while the savings rate has increased. BEA Deputy Director of National Economic Accounts Dave Wasshausen stated that the overall condition of the US economy has not changed.

Other data released on Thursday shows that initial jobless claims in the US dropped to 0.218 million, a 4-month low.

In recent months, despite the rise in the US unemployment rate and the slowdown in job creation, the number of initial jobless claims has remained low. Economists attribute this to eligible workers for such benefits not actually being unemployed.

Although weekly jobless claims remain low, several large companies have announced or implemented layoff plans this month. Paramount Global conducted a second round of layoffs on Tuesday. General Motors announced last week that it will temporarily lay off two-thirds of the workers at a plant in Kansas until mid-2025.

If layoffs increase in the coming months and more Americans find themselves unemployed, Federal Reserve officials may consider cutting interest rates at a faster pace than currently expected.

These data were released after the Federal Reserve lowered rates by 50 basis points, as the Federal Reserve is currently trying to protect the “favorable state” of the US economy as mentioned by Chairman Powell.

Powell stated after the rate cut on September 18: “The economy is growing at a steady pace, inflation is declining. Labor market conditions are good. We want to maintain this situation. This is what we are doing (through rate cuts).”

Thursday's GDP data is considered "retrospective" as it is an update on the US quarterly economic growth ending in June. However, forecasts show that the US economy has been steadily growing through the third quarter ending in September.

The Atlanta Federal Reserve's GDPNow tracker currently estimates the US economy's annualized growth rate for the third quarter at 2.9%. Meanwhile, Goldman Sachs' economic team forecasts that the US economy will grow at an annualized rate of 3% in the third quarter.

Editor/Jeffy