The United States economy expanded at an annualised rate of 3.8% in the second quarter of 2024, marking the fastest growth in nearly two years. This increase follows a contraction in the first quarter and comes as the government revised its estimates of consumer spending upward, according to a report from the Bureau of Economic Analysis (BEA). The revised growth rate surpasses the previously reported 3.3% percent and emphasizes a robust recovery from the economic impacts of the COVID-19 pandemic.
The latest report illustrates a steady economic rebound, with real GDP showing an average annual growth of 2.4% from 2019 to 2024. These revisions indicate a transition towards a steadier growth trajectory, despite ongoing inflationary pressures. The second quarter’s data confirm that the economy rebounded significantly after a surge in imports at the beginning of the year, as companies stocked up in anticipation of tariffs imposed by then-President Donald Trump.
Consumer and Business Spending Drive Growth
Consumer spending, which is the primary driver of economic growth, increased at a 2.5% annualised pace. This uptick reflects higher expenditures on transportation services, financial services, and insurance. Meanwhile, business investment surged at a remarkable 7.3% rate, largely propelled by record spending on intellectual property products, including software and research.
Investment in data centres, which support the infrastructure for technologies such as artificial intelligence, reached a new high of over $40 billion on an annualised basis. This sector has seen significant growth in recent years, prompting the BEA to provide detailed data on it, previously included in broader investment categories.
Despite these positive signs, the Federal Reserve Bank of Atlanta had anticipated a growth rate of 3.3% for the upcoming July to September period. Some economists express caution regarding the fourth quarter, pointing to weaker employment figures that may hinder consumer spending capabilities. Forecasts suggest that economic activity may only improve marginally in 2026, largely influenced by tax policies and lower interest rates, with many expecting growth to remain below 2% in the coming years.
Inflation and Job Market Insights
Recent data also shed light on inflation trends and the job market. The BEA’s revisions indicated that the Fed’s preferred inflation metric, the personal consumption expenditures price index—excluding food and energy—rose to 2.6% in the second quarter. Economists predict that upcoming monthly PCE data will show an inflation increase of nearly 3% year-on-year for August.
In terms of employment, the latest statistics showed that initial applications for unemployment benefits fell last week to their lowest level since mid-July. Bill Adams, chief economist at Comerica Bank, noted that while hiring remained sluggish in 2025, the resilience of economic growth suggests the job market has not deteriorated significantly in September.
Adams emphasized that the recent GDP and jobless claims data should alleviate concerns stemming from a weaker jobs report in August and downward revisions to benchmark employment data. He remarked, “Hiring is in low gear in 2025, but economic growth is resilient, and the job market does not appear to have weakened in September.”
While these developments may imply potential interest rate cuts by the Fed in the remaining meetings of the year, caution persists among policymakers due to sustained high inflation levels. Fed Chairman Jerome Powell indicated that the pass-through effects of tariffs have been slower and smaller than initially expected, impacting corporate profits. The latest report shows profits rose by 0.2% in the second quarter, which is significantly lower than earlier projections.
As the economy navigates these complex dynamics, the focus remains on consumer demand and business investment as key indicators of future performance. The BEA’s revisions, which incorporate more comprehensive data, paint a picture of an economy that is gradually stabilizing and adapting to the aftermath of recent challenges.
