According to the preliminary second estimate from the Bureau of Economic Analysis, real US Gross Domestic Product (GDP) increased at an annualised rate of +3.0% in Q2 24, marking an advance from the first estimate of +2.8% and the annual rate of +1.4% in Q1 24. The release immediately sent US Treasury yields and the US dollar (USD) northbound.

Upside Revision in Consumer Spending

The upside revision in real GDP was bolstered by personal consumption – essentially, Americans are spending more. The upward revision in consumer spending saw consumption rise to +2.9% in the second estimate from +2.3% in the first estimate.

This reflects a resilient economy despite the Fed funds target rate remaining in restrictive territory at 5.25%-5.50% for nearly a year. This helps support the notion that a soft landing could be on the table for the US economy and helps reassure the US Federal Reserve (Fed) as they gear up to ease policy at the September meeting. Markets are pricing in -33 basis points of easing for September and investors are still forecasting -100 basis points of cuts for the entire year.

The downward revisions in the Personal Consumption Expenditures Index (PCE) may also provide additional reassurance for the Fed. The second estimate highlighted that the PCE Index rose to an annualised rate of +2.5% in Q2 24, down from the first estimate of +2.6% (and +3.4% in Q1 24). Core PCE, which excludes food and energy components, was revised lower to a rise of +2.8% (Q2 24) from +2.9% in the first estimate (+3.7% in Q1 24).

US Jobs Market Unchanged

Other numbers out of the US were weekly jobless filings, which revealed an unchanged jobs market.

Weekly unemployment claims were 231,000 in the week ending 24 August, down from the revised 233,000 reading a week prior. Continuing claims were slightly higher by 13,000 at 1.868 million in the week ending 17 August.

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