Estimates of 2024 second quarter economic growth have been all over the map, but I will attempt to separate the wheat from the chaff, so to speak.
Firstly, GDP growth is mostly dependent on consumer spending, which makes up some two-thirds of it. And right now, consumers continue to spend after hesitating in Q1 led to just 1.4 percent Q1 GDP growth. But I believe Q2 will be better, which will keep the budget deficit within an acceptable range. More on that later.
The Federal Reserve’s consumer credit measure for May—the 2nd month of the second quarter—just showed a big jump in consumer spending. Total consumer credit rose $11.3 billion in May, up from a $6.5 billion gain in the prior month, the Federal Reserve said Monday.
The rise in May translates into a 2.7% annual rate says MarketWatch’s Jeffry Bartash, stronger than the 1.5% rise in the prior month. Revolving credit, like credit cards, jumped by a 6.3% annual rate in May after a rare 0.8 % fall in the prior month. Nonrevolving credit, typically auto and student loans, rose by a 1.4% rate after a 2.4% rise in the prior month.
Why is this important? Revolving credit (i.e., cards) is spent on everyday items as well as travel and leisure, and we are in the summer season of most travel. This jump is spending should mean a boost in consumer confidence going into the fall.
The Atlanta Fed GDPNow estimate of Q2 growth jumped today, which I believe is the best indicator of what the BEA’s Q2 initial estimate of growth might look like that will be out in two weeks.
“The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2024 is 2.0 percent on July 10, up from 1.5 percent on July 3…after last Friday’s employment report from the Bureau of Labor Statistics and this morning’s wholesale trade report from the US Census Bureau…”
Real Domestic Private Investment, a major component of GDP growth, has also been surging. It is now growing at 5 percent in Q1 and is up a total 11 percent from Q1 2023 when it was shrinking. This is huge, because, remember I mentioned in a recent blog that more private investment in infrastructure as well as CHIPS and other manufacturing incentives built into Bidenomics lessens the need for taxpayer funding and hence lowers the budget deficit.
And in more good news, Fed Chair Powell remarked at today’s house congressional hearing that the Fed will not wait to reach its 2 percent target rate before beginning to cut rates.
This is the best of news, though it will now have investors worrying about some unseen dangers that may lie ahead that the Fed may be worrying about. What are they? Watch the news!
Harlan Green © 2024
Harlan Green on Twitter: https://twitter.com/HarlanGreen
No comments:
Post a Comment