Good News About The U.S. Economy
Published Friday, July 28, 2023 at: 7:20 PM EDT
The economy turned a corner this past week amid a flurry of good news that continued to beat the expectations of experts. Here’s what investors need to know.
The inflation rate declined more than expected in June, and the gross domestic product grew more than expected in the second quarter, according to the latest data released this past week by the U.S. Government. In addition, the Federal Reserve hiked interest rates for the eleventh time since March 2022 in its historic campaign to fight the post-Covid inflation crisis and not a whiff of recession was in the outlook for the foreseeable future.
The inflation rate in June rose by two-tenths of 1%, according to the personal consumption expenditures deflator (PCED), which is the inflation benchmark used by Federal Reserve policymakers. The June inflation rate, on an annualized basis, puts the inflation rate on a trajectory in line with the U.S. central bank’s goal of reducing inflation to a 2% annual rate. The annual inflation rate peaked in June 2022 at 7% and is currently at 4.1% on an annual basis, but it declined sharply in recent months as the Federal Reserve hiked rates in one of the most aggressive monetary campaigns in American history.
On Wednesday, July 26, Federal Reserve policymakers concluded their two-day meeting and announced a rate hike of a quarter of 1%, as widely anticipated.
Real gross domestic product (GDP) increased at an annual rate of 2.4% in the second quarter of 2023, according to the "advance" estimate by the Bureau of Economic Analysis. The estimate is the first of two BEA preliminary estimates of quarterly gross domestic product before a final GDP figure is released three months after the end of every quarter.
In the first quarter, real GDP increased by 2%. The increase in the second quarter to 2.4% primarily reflected increases in consumer spending and business investment. Thus, the economic growth rate of the U.S. accelerated in the second quarter despite the toughest monetary tightening policy in modern U.S. history. The strength of the economy has defied the expectations of economists all year long.
The Standard & Poor’s 500 stock index closed Friday at 4582.23, up +0.99% from Thursday, and up +1.01% from a week ago. The index is +104.80% from the March 23, 2020 bear market low and only -4.47% from its January 3, 2022, all-time high.
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