GDP downgraded to 2.1% annual rate in Q2.
Economic Growth Remains Strong Despite Interest Rate Hikes
The latest update on the US economy reveals that economic growth increased at a 2.1% annual rate in the second quarter of this year. Although this is a slight downward revision from the preliminary estimate, it still indicates that the economy has remained robust.
The report shows that consumer spending, measured by personal consumption expenditures, increased in the second quarter. This is a positive sign that US economic activity is still thriving, even as the Federal Reserve continues to raise interest rates in response to inflation.
After a series of interest rate hikes over the past year, the Fed recently raised rates again, bringing its target range to 5.25% to 5.50% – the highest level in over two decades. While rate increases can slow economic output, the fact that GDP growth has remained positive in both the first and second quarters is welcome news to economists.
Inflation Slows Down
In addition to the positive GDP growth, inflation has also been slowing down. According to the consumer price index, inflation was at a 3.2% annual pace in July. However, the Fed has made it clear that taming inflation is their top priority and they are open to further rate increases if necessary.
Last week, Federal Reserve Chairman Jerome Powell hinted at the possibility of more tightening measures in his annual Jackson Hole speech. He emphasized the need to carefully assess the data and outlook before deciding on the next steps.
Labor Market Holds Steady
Despite the interest rate hikes, the labor market has held up remarkably well. However, there have been some signs of softening, as seen in the recent decrease in job openings to the lowest level in over two years.
The next employment report, which measures the performance of the job market in August, is set to be released on Friday morning.
Overall, the US economy continues to show resilience and strength, even in the face of tightening monetary policy. It will be interesting to see how these factors evolve in the coming months and how they will impact the future of the economy.
Source: The Washington Examiner
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