Economy Good

Up, economy! Good!

The economy is good! But is it cute? Photo by Joe Caione on Unsplash

The US economy is doing pretty darn good, according to data released Thursday by the Commerce Department. Economic growth in the second quarter exceeded economists’ expectations, with the Gross Domestic Product rising by 2.4 percent (Bloomberg gift link, good for six days) after a first quarter rate of two percent. Consumer spending was up too, by 1.6 percent, after a nice big gallop at the start of the year and then some quieter looking around in wonder at the beauty of God’s green earth and musing that perhaps consumerism isn’t the only way to live. (We’re interpreting the data holistically.)

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Bloomberg also reports that “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 skinny is that while economists had been expecting a recession, the economy is in pretty darn good shape, what with “a strong labor market, sturdy consumer spending and now easing inflation.”

Even Gloomy Gus Federal Reserve chair Jerome Powell said Wednesday the Fed is no longer expecting a recession, although inflation is still enough of a concern that the Fed raised interest rates a quarter of a 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 US 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, because economists have to be dismal about something, Bloomberg economist Anna Wong suggested that the stronger second-quarter growth might be bad, too. Don’t blame her, it’s her job to say stuff like this. The jump in GDP, she explained,

reflects an economic force working against the Fed’s efforts to reduce inflation – expansionary fiscal policy... If the recession we predict this year is delayed rather than averted, and the Fed ultimately has to hike more than we currently anticipate — the most likely culprit will be Bidenomics.”

We love economist talk! If there’s ever a slowdown, which, yeah, recessions happen, then it’s definitely Biden’s fault, because it was only “delayed” instead of “averted,” although you’ll note she offered no time frame that would distinguish between the two.

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Also, in a sign that the Biden administration’s industrial policy — through the bipartisan infrastructure law, the Inflation Reduction Act, and the CHIPS and Science Act — is stimulating the manufacturing sector, there’s more upswing for economists to be happy/worried about.

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.

And finally, after the Fed’s inflation-punching interest rates caused the housing market to go into a “tailspin” for a time last year, “the sector is now showing signs of stabilizing,” which is good because your house should never spin unless you’ve had too much to drink or you have an inner ear infection, better have that checked the end.

[Bloomberg (gift link good for six days)]

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