GDP resiliency is surprising
Companies, shoppers fuel 2.4% annualized growth rate in second quarter
U.S. economic growth unexpectedly picked up steam in the second quarter thanks to resilience among consumers and businesses in the face of high interest rates.
Gross domestic product rose at a 2.4% annualized rate after a 2% pace in the previous three months, the Commerce Department's initial estimate showed Thursday. Consumer spending increased at a 1.6% pace, more than forecast, after surging at the start of the year.
The Federal Reserve's preferred underlying inflation metric advanced at a slower-than-expected 3.8% pace. Treasury yields rose and the S&P 500 opened higher.
The U.S. economy is in better shape than economists had expected it would be just a few months ago. While forecasters are split on the odds of a recession, a strong labor market, sturdy consumer spending and now easing inflation have fueled hopes that the U.S. will avoid a downturn.
The Fed staff is no longer forecasting a recession, Chair Jerome Powell said Wednesday after the central bank raised interest rates by a quarter percentage point. Powell also said that it's his own expectation that the Fed can cool inflation
without a big increase in unemployment.
“Growth is outpacing expectations even as the monetary policy stance has become restrictive,” Rubeela Farooqi, chief U.S. economist at High Frequency Economics, said in a note. “A strong household sector that continues to benefit from positive job growth and rising real incomes should keep growth on a positive trajectory this year.”
Still, headwinds persist with the Fed's benchmark interest rate at a 22-year high and some signs of consumer strain bubbling.
The personal consumption expenditures price index grew at an 2.6% annualized pace in the April to June period, the smallest advance since the closing months of 2020. Excluding food and energy, the index rose at the slowest pace in more than two years. June data will be released Friday.
The persistent strength of the jobs market remains a key source of support for the economy. Separate data out Thursday showed applications for unemployment benefits retreated to the lowest level since late February. Continuing claims, which can offer insight into how quickly out-of-work Americans are able to find a new job, declined to the lowest since January.
The GDP data showed services
spending rose at a 2.1% annualized rate, led by housing and utilities, health care and financial services. Outlays on goods increased at a 0.7% rate, after surging by the most in nearly two years in the prior period. Inflation-adjusted spending data for June, and any revisions to prior months, will also be released Friday.
Nonresidential fixed investment increased at the fastest pace in more than a year. Business spending on structures continued to grow at a breakneck pace, bolstered by recent efforts to shore up domestic factory production.
Outlays for equipment surged at a 10.8% rate, the most in more than a year, after decreasing in the previous two quarters. Spending on intellectual property products also accelerated.
Inflation-adjusted final sales to private domestic purchasers — a key gauge of underlying demand — rose 2.3% after a 3.2% at the start of the year. Those are the strongest back-to-back gains since 2021.
Residential investment decreased for a ninth-straight quarter. While the rapid rise in interest rates sent the housing market into a tailspin last year, the sector is now showing signs of stabilizing.
Toyota bringing back Land Cruiser to U.S.
Two years after telling Americans the Land Cruiser would end sales in the U.S., Toyota Motor Corp. has switched its tune.
During a Wednesday phone call, Toyota spokesperson Nathan Kokes said the Japanese car manufacturer will announce details of a U.S.-bound Land Cruiser on Aug. 1.
Toyota executives have been hinting for months that the brand's longestrunning nameplate would return to the U.S. On July 6, a teaser photo on the Toyota website showed a firstgeneration Land Cruiser parked opposite an unnamed four-door SUV. “With 65 years of heritage, you can choose to slow down or reinvent yourself. We chose the latter,” said the caption.
Instagram posts from the 85-year-old company on Wednesday morning included the mud-splattered flank of an unidentified vehicle and a vague caption about a new adventure beginning. A concurrent post on the ToyotaUSA Instagram account announced the reborn U.S. Land Cruiser.
Kokes declined to specify the expected platform for the vehicle, but said it would be confirmed during the Aug. 1 news event. Anheuser-Busch lays off hundreds after slump
Anheuser-Busch, the maker of Bud Light, confirmed this week is laying off hundreds of positions across its U.S. corporate staff.
The beer maker told the AP the layoffs will impact less than 2% of its workforce. Anheuser-Busch's website says the company employs 19,000 employees nationwide. Warehouse staff, drivers and other frontline employees will not be affected, the company said.
The job cuts arrive during a rocky time for Anheuser-Busch, which has seen a months-long sales decline for Bud Light since April when conservative critics vowed to boycott the brand after the brewer sent a commemorative can to transgender influencer Dylan Mulvaney. Bud Light has also faced backlash from Mulvaney's supporters and LGBTQ+ rights groups, who say the brand didn't do enough to support her.
Mulvaney later shared that she felt abandoned by Bud Light, and faced “more bullying and transphobia than I could have ever imagined” over the partnership.
Bud Light is continuing to lose share in the U.S. market to brands like Modelo Especial, which recently surpassed Bud Light in sales for the first time. Market rally runs out of gas despite good news
Stocks fell Thursday, taking some air out of Wall Street's big recent rally, despite fatter-than-expected profit reports from big companies and the latest signals of a resilient economy.
Honeywell International was a heavyweight on the market despite reporting stronger profit for the spring than analysts expected. It dropped 5.7% after its revenue fell short of analysts' expectations, as did its forecast for earnings in the current quarter.
In the bond market, Treasury yields rallied after the wave of reports indicated the economy is in stronger shape than expected.
The yield on the 10-year Treasury rose to 4.00% from 3.87% late Wednesday. The two-year Treasury yield, which moves more on expectations for the Fed, rose to 4.92% from 4.85%.
Thursday's drops for stocks came despite a stronger-than-expected profit report from Meta Platforms, one of Wall Street's most influential stocks. The owner of Facebook, Instagram and WhatsApp attracted additional active members, and its stock rose 4.4%.
McDonald's rose 1.2% after it easily topped analysts' forecasts for profits during the spring and said its sales grew worldwide.
Compiled from Bloomberg and Associated Press reports.