The Most Important Thing Today (8/2/23)

• The US economy unexpectedly accelerated in the second quarter. GDP expanded at a 2.4% annualized rate, compared to 2% in the first quarter. The growth was well ahead of the expected 1.8% growth rate by economists surveyed by Bloomberg.
• Under the hood of the report, the growth was primarily driven by consumer spending, which grew at a 1.6% growth rate, and business investment, which grew at a 5.7% growth rate. Nonresidential business investment surged 7.7%, though the headwinds facing residential investment continue to take their toll. Also, goods exports contracted at a 16.3% annual rate during the quarter.
• Forecasters are likely to remain divided on whether this report suggests that a recession will be delayed or perhaps averted. While economic risks remain, the strong GDP report may increase the likelihood of a "soft landing" for the economy but could also prompt the Federal Reserve to consider additional interest rate hikes in the future.

Source: Helios Quantitative Research, Bloomberg, Bureau of Economic Analysis