GDP growth in the second quarter was revised up by 0.2 percentage points to a strong 3% seasonally adjusted annual rate.
The revised growth rate for the second quarter reported by the Bureau of Economic Analysis on Thursday is up from 1.4% growth in the first quarter of the year. This is good news for Vice President Kamala Harris , who is working to reassure voters that the economy will fare well under her. Harris has been tied to President Joe Biden’s stewardship of the economy, which has been plagued by high inflation and general economic discontent.
There will be one more final estimate on how much the economy expanded during the second quarter. The government updates its GDP estimates over several weeks as analysts get a better picture of how the economy performed during the past quarter.
The data show the economy has some underlying strength, even amid signs of a weakening labor market.
The second quarter’s GDP reading is also an uptick from all of 2023, when the economy expanded a healthy 2.5% for the year.
"We still cannot rule out a recession in the months ahead, but 3.0% real GDP growth is certainly not showing any immediate signs that the economy is sailing into a storm and that the Fed is behind the curve in tightening down the hatches," said Chris Rupkey, chief economist at FWDBONDS. "The economy rolls on for now. Enjoy the beach this weekend because winter is coming."
Harris will undoubtedly tout the GDP numbers on the campaign trail, given that her campaign is looking to highlight any good news about the economy. The economy has been the No. 1 issue on voters’ minds, in large part due to inflation.
While inflation has been falling and annual inflation is running at a much more manageable 2.9%, according to the consumer price index, years of compounded inflation are causing voters pain. Since Biden was sworn in in January 2021, prices, on average, are up nearly 20%.
Voters don’t necessarily gauge inflation by how much it has increased over the past 12 months but might more broadly compare how much goods and services are now to how much they were before Biden entered office.
The labor market, which has remained remarkably resilient despite the Federal Reserve hiking interest rates in response to inflation, has started to slow.
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The economy added 114,000 jobs in July, far fewer than expected, and the unemployment rate rose two-tenths of a percentage point to 4.3%, the Bureau of Labor Statistics reported.
That has given the Fed further evidence it is time to start cutting interest rates, and most Fed watchers expect the central bank to make its long-awaited pivot at its next meeting in September. Higher rates hurt consumers because it makes it more expensive to take on debt and take out loans, and it makes homebuying more expensive by driving up mortgage rates.
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