What Recession? U.S. Economy Shatters Forecasts For Quarterly GDP Growth

Topline

The economy grew by more than expected during the second quarter of this year, according to Bureau of Economic Analysis data released Thursday morning, as the U.S. defies yearslong concerns of a slowdown, even as anxiety about corporate profit growth sends Wall Street into a tizzy.

The U.S. has defied fears of an extended downturn thus far, but it’s still on a tightrope with high … [+] interest rates and lingering inflation.

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Key Facts

Real gross domestic product, which tracks the inflation-adjusted total value of all goods and services produced in the U.S., grew by 2.8% in 2024’s second quarter compared to the same period a year ago.

That is far better than consensus economist estimates of 2.1%, comfortably beating Q1’s 1.4% economic expansion.

“The US economy is much stronger than people realize and to the extent that markets were worried about a growth slowdown, they should breathe a sigh of relief after this morning’s GDP number,” wrote Chris Zaccarelli, Independent Advisor Alliance’s chief investment officer, in emailed comments.

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Key Background

Thursday’s GDP release came a day after the stock market exhibited significant concerns about corporate profit growth, with the S&P 500 experiencing its worst day since 2022 as the leading American equity index lost 2% in value. Though economic output and corporate profits are not directly related, they tend to move in similar directions, as higher profits tend to come with strong consumer spending and high efficiency, both of which lead to a healthier economy. The U.S. actually entered a technical recession, defined as consecutive quarters of negative GDP growth, in the first half of both of 2020 and 2022. The economy quickly bounced back from 2020’s blip, but defied many economists’ calls for an extended recession beginning in 2022 as the worst inflation in more than 40 years abounded. Fears of that recession coincided with a sharp uptick in interest rates, from March 2020 to March 2022’s near zero, to over 5% Prior periods with similarly rapid increases in rates have brought extended economic downturns, as pricier borrowing normally slows economic growth as the business and personal loans that often drive expansion grow pricier.

Tangent

The latest GDP data is well in line with normal historic bounds and above the median quarterly growth of 2.4% the U.S. experienced from 2014 to 2019—before quarterly readings fluctuated wildly due to the unprecedented effects of the COVID-19 pandemic.

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