The US economy is pulling off something historic
The economy’s enduring strength is a boon for the Biden administration. Despite the Fed aggressively raising interest rates to tamp down inflation, which have been perched at a 23-year high since last July, the economy has so far avoided a recession. Last year, the resilience of the US consumer shocked economists who widely expected an economic downturn to ensueWashington CNN —
The US economy is on the verge of an extremely rare achievement.
Economic growth in the first half of the year was solid, with the economy expanding a robust 2.8% annualized rate in the second quarter, according to fresh Commerce Department figures released Thursday, which are adjusted for inflation and seasonal swings.
Stocks surged in the morning after the economy’s powerful show of resilience, but later lost steam and closed the day mixed. The Dow rose 81 points, or 0.2%, after jumping more than 500 points earlier in the session. The S&P 500 fell 0.5% and the Nasdaq Composite lost 0.9%. That comes after the benchmark index and tech-heavy Nasdaq on Wednesday logged their worst day since 2022.
Gross domestic product, the broadest measure of economic output, was much stronger in the second quarter than economists had predicted. The GDP report showed that businesses are continuing to invest and that consumers are still opening their wallets. That’s key, because consumer spending is America’s economic engine, accounting for about two-thirds of US economic output.
As the economy continued to expand from April through June, inflation resumed a downward trend and seems to be on track to slowing further toward the Federal Reserve’s 2% target.
America’s economy is about to stick what’s called a “soft landing,” which is when inflation returns to the Fed’s target without a recession — a feat that’s only happened once, during the 1990s, according to some economists.
The latest GDP report showed that a key gauge of consumer demand picked up in the second quarter to an annual rate of 2.9%, matching the rate in the fourth quarter of 2023 for the strongest pace in two years. A measure of business investment also strengthened in the April-through-June period.
The current health of the American economy shows that the Fed, with Jerome Powell at the helm as chair, has successfully handled inflation so far, with the finish line coming into clear view. The Fed beginning to cut interest rates indicates that central bank officials feel confident that inflation is under control just enough.
The economy’s enduring strength is also a boon for the Biden administration. Despite the Fed aggressively raising interest rates to tamp down inflation, which have been perched at a 23-year high since last July, the economy has so far avoided a recession. Last year, the resilience of the US consumer shocked economists who widely expected an economic downturn to ensue.
