GDP REAFFIRMS RESILIENCE IN THE ECONOMY, BOOSTS PROSPECTS OF A SOFT LANDING
U.S. economic growth accelerates. Real gross domestic product increased at an annualized rate of 2.4 percent in the second quarter of this year, outpacing consensus expectations for 1.5 percent growth. It also marked an acceleration from the 2.0 percent advance during the first three months of 2023. Gains in consumer spending, non-residential fixed investment, private inventory investment, as well as state, local and federal government spending, contributed to this momentum. The U.S. economy has now expanded at a 2-plus percent pace in each of the past four quarters, following a mild reduction in early 2022.
Infrastructure investment evident in industrial construction. Gross private domestic investment rose by an annualized rate of 5.7 percent, after falling by 11.9 percent in the first quarter. Businesses are elevating expenditures on equipment, intellectual property products and non-residential structures. Government spending also improved by an annualized rate of 2.6 percent during the second quarter, due in part to investments in infrastructure. Efforts to improve semiconductor and electric vehicle manufacturing helped lift industrial development to near-record levels, as roughly 400 million square feet of space is slated for delivery in 2023.
Gains in consumer spending may soften. Americans have benefited from a tight labor market that has driven above-average wage gains and helped household budgets overcome persistent inflation. Consumer spending improved at an annualized rate of 1.6 percent in the second quarter; nevertheless, this figure is down from the 4.2 percent gain during the first three months of the year. Households have shown a willingness to spend, but they have become increasingly price sensitive amid record debt balances and tighter credit conditions. The national retail vacancy rate has held below 2019 levels, remaining at 4.6 percent during each of the past three quarters ending in June. However, the resumption of student loan repayments later this year will impact the spending power of more than 43 million borrowers, which may continue to slow growth in personal consumption expenditures through the rest of the year.
Sources: Marcus & Millichap Research Services; Bureau of Economic Analysis; CoStar Group, Inc.; CME Group