Blog #Lee & Associates

GDP Growth: 

• U.S. GDP grew at an annualized 2.8% in Q3, slightly below Q2's 3%.
• Consumer spending rose 3.7%, the fastest since Q1 2023, but residential investment dropped 5.1%, its second consecutive decline.
• Inflation hit the Fed's 2% target, with unemployment steady near 4%.

 Employment: 

• 254,000 jobs were added in September, the largest gain in six months.
• The unemployment rate fell to 4.1%, while wages increased 4% year-over-year.
• Upward revisions to prior months' job numbers highlight ongoing labor market resilience.

 Monetary Policy: 

• The Federal Reserve cut interest rates by 0.5% in September, lowering the federal funds rate to 4.75%-5%.
• Strong job data makes further significant rate cuts unlikely.
• Fed Chair Powell emphasized balancing inflation control with stable employment.

 Global Economy: 

• IMF projects global growth of 3.2% for 2024-2025, with risks from regional conflicts and trade disruptions.
• Emerging Asia sees growth upgrades due to semiconductor demand, while Europe faces downgrades.
• Global inflation is expected to decline from 6.7% in 2023 to 5.8% in 2024 and 4.3% in 2025.
• Long-term growth remains constrained by aging populations and weak productivity.

GDP Growth: Q2 2024

• U.S. GDP grew at a 2.8% annual rate in Q2, up from 1.4% in Q1.
• Growth driven by increased consumer spending, business investment, and inventory growth.
• Consumer spending rose by about 2%, especially in health care, housing, recreation, and durable goods.
• Business investment increased, particularly in equipment and intellectual property.
• Inventory growth was notable in wholesale and retail trade, offset by declines in mining, utilities, and construction.
• Gross domestic purchases prices increased by 2.3%, down from 3.1% in Q1.
• Excluding food and energy, prices increased by 2.5%, down from 3.3% in Q1.
• Personal consumption expenditures price index increased by 2.6%, compared to 3.4% in Q1.
• Current-dollar personal income increased by $237.6 billion, down from $396.8 billion in Q1.
• Real disposable personal income growth slowed, and the personal saving rate decreased to 3.5%.

Employment: Q2 2024

• 206,000 jobs added in June, with a slight rise in the unemployment rate to 4.1%.
• Labor force participation rate increased to 62.6%, driven by prime-age workers.
• Wage growth slowed, with average hourly earnings rising 0.3% from May and 3.9% year-over-year.
• Job growth mainly in government and healthcare sectors.
• Private sector payrolls slowed, with gains in construction offset by declines in manufacturing.
• Job openings rose to 8.14 million in May, but a cooling trend is expected.

Monetary Policy: Q2 2024

• Federal Reserve left the overnight federal funds rate unchanged.
• Potential for at least one interest rate cut in 2024 remains.
• Disinflation resumed, with CPI inflation falling to 3.3% in May.
• FOMC held rates steady, awaiting further evidence of returning inflation to the 2% target.
• Financial markets expect a 0.25% rate reduction in September.
• Labor market showed better balance between supply and demand, with nominal wage increases trending down.

Global Economy: Q2 2024

• IMF forecasted global growth at 3.2% for 2024 and 3.3% for 2025.
• U.S. growth revised to 2.6% for 2024, slowing to 1.9% in 2025.
• Euro area expected to see modest growth driven by services and net exports.
• Japan's growth outlook revised downward due to supply disruptions and weak investment.
• Stronger activity in emerging markets, especially China (5% growth forecast for 2024) and India (7%).
• Latin America faced downward revisions for Brazil and Mexico due to natural disasters and moderating demand.
• Middle East and Central Asia impacted by oil production cuts and regional conflicts, with notable downward revisions for Saudi Arabia and Sudan.

The standout feature of the 3rd Quarter of 2023 was the unexpectedly rapid expansion of the Gross Domestic Product (GDP), outpacing earlier projections and reflecting robust economic performance. This accelerated growth trajectory defied initial forecasts, signaling a buoyant and thriving economy. 

Furthermore, the labor market exhibited remarkable resilience during this period, showcasing sustained employment figures and reinforcing the economy's underlying strength. This continuity in job creation and stability contributed significantly to the overall positive economic landscape. 

In a notable decision, the Federal Reserve opted against raising interest rates, a move indicative of their confidence in the current economic conditions. This decision aimed to sustain the momentum of growth and support ongoing economic recovery without implementing tighter monetary policies. 

Despite persistent world conflicts and geopolitical tensions, several facets of the global economy exhibited signs of improvement. This unexpected resilience and progress in various economic indicators underscored the capacity of certain regions and sectors to navigate challenges and thrive despite prevailing uncertainties. 

Collectively, these factors marked a dynamic and promising quarter for the economy, reflecting both resilience and unexpected vigor in the face of various domestic and international challenges.

Slowing Inflation and a Growing Economy is a positive sign for Q2-2023.