According to our analysis USDJPY and EURUSD moved 47 pips on US Gross Domestic Product (GDP) data on 29 August 2024.
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U.S. Economy Shows Strong Growth in Q2 2024: A Closer Look at the Latest GDP and Corporate Profits Data
The U.S. Bureau of Economic Analysis (BEA) has released the "second" estimate for the Gross Domestic Product (GDP) for the second quarter of 2024, revealing a stronger economic performance than initially reported. The updated figures show a robust annual growth rate of 3.0% for real GDP, marking a notable acceleration from the 1.4% growth observed in the first quarter of the year. This positive momentum underscores the resilience of the U.S. economy amidst various global and domestic challenges.
Key Highlights from the Second Quarter GDP Report
Real GDP Growth: The real GDP increased at an annual rate of 3.0% in Q2 2024, up from the "advance" estimate of 2.8%. This revision is based on more comprehensive data, particularly reflecting stronger-than-expected consumer spending. In comparison, the GDP growth in Q1 2024 was 1.4%, highlighting a significant acceleration.
Components of GDP: The growth in GDP was driven primarily by increases in consumer spending, private inventory investment, and nonresidential fixed investment. However, these gains were partially offset by a downturn in residential fixed investment. Additionally, imports, which subtract from the GDP calculation, increased during the quarter.
Current-Dollar GDP: On a current-dollar basis, GDP increased by 5.5% or $383.2 billion in Q2, reaching a total level of $28.65 trillion. This is an upward revision of $23.2 billion from the previous estimate.
Price Indices: The price index for gross domestic purchases rose by 2.4%, slightly up from the prior estimate of 2.3%. The personal consumption expenditures (PCE) price index, a key measure of inflation, increased by 2.5%, though this is a slight downward revision from the earlier estimate of 2.6%. Excluding volatile food and energy prices, the core PCE price index increased by 2.8%.
Insights on Personal Income and Savings
Personal Income: Current-dollar personal income saw an increase of $233.6 billion in Q2, which is a downward revision of $4.0 billion from the earlier estimate. This rise was primarily driven by higher compensation and personal current transfer receipts.
Disposable Personal Income: Disposable personal income, after taxes and adjustments, increased by $183.0 billion or 3.6%, which is slightly lower than the previous estimate. Real disposable personal income, which accounts for inflation, grew by 1.0%.
Personal Saving Rate: The personal saving rate, defined as personal saving as a percentage of disposable personal income, was revised down to 3.3% from the previous estimate of 3.5%.
Corporate Profits Rebound in Q2 2024
A significant highlight of the report is the rebound in corporate profits in Q2 2024. Profits from current production increased by $57.6 billion, following a decline of $47.1 billion in Q1. This marks a substantial recovery and suggests improved profitability among U.S. businesses.
Sectoral Performance: Profits of domestic financial corporations increased by $46.4 billion, though this is a deceleration from the $65.0 billion increase in Q1. Nonfinancial corporations, on the other hand, saw profits rise by $29.2 billion, reversing a decline of $114.5 billion in the previous quarter. However, profits from the rest of the world decreased by $18.0 billion, contrasting with a $2.3 billion increase in Q1.
Understanding the Revisions and Future Releases
The upward revision in the GDP estimate for Q2 was mainly due to stronger consumer spending, offset by downward adjustments in other areas like nonresidential fixed investment, exports, and government spending. The BEA will continue to refine these estimates as more data becomes available.
Looking ahead, the BEA will release the third estimate of GDP and revised corporate profits for Q2 2024 on September 26, 2024. This will coincide with the annual update of the National Economic Accounts, which includes revised statistics for GDP, GDP by industry, and gross domestic income.
Conclusion
The latest GDP figures for Q2 2024 indicate a resilient and growing U.S. economy, bolstered by robust consumer spending and a rebound in corporate profits. While certain sectors, such as residential fixed investment, have shown weakness, the overall economic landscape appears positive. As we await further data and the next round of estimates, these findings provide a cautiously optimistic outlook for the remainder of the year.
Stay tuned for more updates as the BEA releases additional data in the coming weeks.
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