The preliminary estimate of US GDP for the second quarter of 2024 showed Economy grows by 2.8%This is much faster than the expected 2.5% increase and almost double the downwardly revised 1.4% growth in the previous quarter!
The Ministry of Commerce explained that the acceleration in growth from the first quarter to the second quarter is mainly due to Increase in investment in private stock And Acceleration in consumer spending.
In fact, consumer spending accelerated from 1.5% to 2.3% and its contribution to GDP rose from 0.98% to 1.57%.
Private inventories, which had been a drag in the last two quarters, added about 0.98% to the GDP calculation and offset the 0.72% drag from the trade gap as imports rose at their fastest rate since the first quarter of 2022.
The inflation measures included in the report showed weaknesses:
- Personal Consumption Expenditures Price Index Decreased from 3.4% to 2.6%
- Core Personal Consumption Price Index Decreased from 2.9% to 3.7%
- Gross Domestic Purchase Price Index Slowed from 3.1% to 2.3%
Link to BEA Advance Q2 2024 GDP estimates
Meanwhile, a separate release showed that purchases of durable (read: long-term) goods by manufacturers fell 6.6% on a monthly basis in June, weaker than the expected slump and 0.1% rise in May.
Core durable goods orders, which are more closely watched, rose 0.5%, beating expectations for a 0.2% gain and a 0.1% decline in May.
Link to the Census Bureau’s Durable Goods Report
Last but not least, the weekly labor market report showed 235,000 initial claims for unemployment benefits in the week ending July 20.
Analysts had expected 247,000 claims after the previous week’s reading of 245,000.
Link to the Department of Labor’s weekly claims report
Market Reactions
US Dollar vs Major Currencies: 5 minutes
US Dollar Overlay Against Major Currencies Chart by TradingView
The US dollar, which was trading in ranges (except against the yen) before the data, rose against the Japanese yen and the Swiss franc after the much better-than-expected Q2 GDP reading. However, it also lost some points against its other major peers.
One reason for the mixed reaction could be that some traders overlooked the report’s backward-looking impact on the Fed’s rate-cutting timeline. The sharp drop in the key durable goods orders report and the general risk appetite on the back of strong GDP also didn’t help.
The US dollar began turning lower against the Japanese yen and the Swiss franc less than an hour after the GDP data was released and soon saw broader weakness.
Fortunately for US dollar investors, the greenback regained some ground in the second half of the US trading session and helped the currency end the day in the green against all its peers except the euro and the Swiss franc.