The United States’ economy continues its extraordinary growth as most of the world struggles.
The United States economy expanded at an annualized 3% in the second quarter, new measurements from the Bureau of Economic Analysis showed on Thursday. The value is above Wall Street expectations and shows continued resilience from the world’s largest economy.
In the first quarter of the year, the Gross Domestic Product in the US grew at 1.4% year-on-year, making investors fear slower economic activity and a possible recession.
Instead, in the second quarter the US GDP rebounded from the previous lows, with nondurable goods manufacturing, finance, and health care as its main growth drivers.
Food services, educational services, and mining output were the main detractors of GDP in Q2.
“The revisions only strengthen our conviction that the US economy will continue to expand at a decent pace over the coming year, which suggests labor market conditions are unlikely to deteriorate markedly from here,” Oxford Economics deputy chief economist Michael Pearce said.
For the current quarter, the Atlanta Federal Reserve GDP tracker predicts a 2.9% increase. Goldman Sachs, which in August priced in a US recession with a 25% chance, now forecasts a 3% GDP increase in the third quarter.
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Fed moves
The measurement was released one week after the Federal Reserve cut interest rates by 50 basis points, reversing a 3-year hiking policy.
“The economy is growing at a solid pace. Inflation is coming down,” Powell said on Sept. 18 after the rate cut decision. “The labor market is in a strong place. We want to keep it there. That’s what we’re doing by cutting interest rates.”
Unemployment was at its lowest level in history last year at 3.4%. As high interest rates were putting a strain on the economy, however, unemployment steadily rose to the current 4.2%.
To avoid further unemployment rises, the Federal Reserve opted for a larger-than-usual rate cut. This decision will likely increase GDP growth in the following quarters too.
Meanwhile, inflation appears to be on track to the 2% target. The Consumer Price Index (CPI) dropped to 2.5% year-on-year in August, lower than expected.
The world’s largest economy maintains its momentum as most of the developed world struggles with recession and high energy prices. Even China, the US’s largest economic and geopolitical rival, is struggling after decades of meteoric economic growth.
