The U.S. economy accelerated again – and well above expectations – in the second quarter, reaching an annualized rate of 2.8%, compared to 1.4% in the first quarter, according to the first estimate released by the Department of Commerce. Analysts had expected an acceleration in growth, but more modest, equal to 2% for the period between April and June. The Department of Commerce explains this acceleration in growth with an “increase in consumer spending on both goods and services” and with an “increase in private investment in inventories”.
The GDP reading recorded a cooling of inflationary pressures as all the price components of the index were below 3%, thus leaving intact expectations of a rate cut by the Fed in September.
Specifically, the deflator showed inflation rose 2.3% in the second quarter, a sharp decline from the 3.1% rate seen in the first quarter and below the 2.6% forecast. The Federal Reserve’s preferred inflation gauge, the PCE price index, is due out tomorrow and is expected to confirm that inflationary pressures are easing.
Today’s data is good news for President Joe Biden, but even more so for Vice President Kamala Harris, who is now the Democratic presidential candidate for November 5 and wants to make the good performance of the economy one of her main arguments. On the other hand, however, it could worry investors, who hope that the signs of a slowdown in the US economy will multiply and that the Fed will start cutting rates at its September meeting, the last before the presidential elections.