The US economy is pulling off something historic | CNN Business (2024)

The US economy is pulling off something historic | CNN Business (1)

As the economy continued to expand from April through June, inflation resumed a downward trend, the latest GDP report shows.

Washington CNN

The US economy is on the verge of an extremely rare achievement.

Economic growth in the first half of the year was solid, with the economy expanding a robust 2.8% annualized rate in the second quarter, according to fresh Commerce Department figures released Thursday, which are adjusted for inflation and seasonal swings.

Stocks surged in the morning after the economy’s powerful show of resilience, but later lost steam and closed the day mixed. The Dow rose 81 points, or 0.2%, after jumping more than 500 points earlier in the session. The S&P 500 fell 0.5% and the Nasdaq Composite lost 0.9%. That comes after the benchmark index and tech-heavy Nasdaq on Wednesday logged their worst day since 2022.

Gross domestic product, the broadest measure of economic output, was much stronger in the second quarter than economists had predicted. The GDP report showed that businesses are continuing to invest and that consumers are still opening their wallets. That’s key, because consumer spending is America’s economic engine, accounting for about two-thirds of US economic output.

As the economy continued to expand from April through June, inflation resumed a downward trend and seems to be on track to slowing further toward the Federal Reserve’s 2% target.

America’s economy is about to stick what’s called a “soft landing,” which is when inflation returns to the Fed’s target without a recession — a feat that’s only happened once, during the 1990s, according to some economists.

The latest GDP report showed that a key gauge of consumer demand picked up in the second quarter to an annual rate of 2.9%, matching the rate in the fourth quarter of 2023 for the strongest pace in two years. A measure of business investment also strengthened in the April-through-June period.

People shop at a supermarket in Montebello, California, on May 15, 2024. Frederic J. Brown/AFP/Getty Images Related article US prices didn’t rise last month for the first time since November

The current health of the American economy shows that the Fed, with Jerome Powell at the helm as chair, has successfully handled inflation so far, with the finish line coming into clear view. The Fed beginning to cut interest rates indicates that central bank officials feel confident that inflation is under control just enough.

The economy’s enduring strength is also a boon for the Biden administration. Despite the Fed aggressively raising interest rates to tamp down inflation, which have been perched at a 23-year high since last July, the economy has so far avoided a recession. Last year, the resilience of the US consumer shocked economists who widely expected an economic downturn to ensue.

“Today’s GDP report makes clear we now have the strongest economy in the world,” President Joe Biden said in a statement Thursday. “The Vice President and I will keep fighting for America’s future — a future of promise and possibilities, of ordinary Americans doing extraordinary things.”

But even as the broader economy remains robust, Americans have still felt sour. Inflation is an economy-wide problem, so the pessimism has been felt broadly. Purchasing a home in many markets across the country remains out of sight, with home prices at a record high and mortgage rates still painfully elevated. The booming job market in the aftermath of the Covid-19 pandemic has recently returned to normal, and it’s becoming a lot tougher to find a new job.

Waiting on the Fed

Fed officials meet next week to set monetary policy, and they’re widely expected to hold interest rates steady. The meeting will also offer a chance for the Fed to communicate whether or not it has gained any additional confidence that inflation is under control. Either way, it’s clear that officials are pleased with the economy’s performance so far.

Chair of the Federal Reserve of the United States Jerome Powell speaks during a Senate Banking, Housing, and Urban Affairs Committee hearing on the Semiannual Monetary Policy Report to Congress at the U.S. Capitol on July 9, 2024 in Washington, DC. Bonnie Cash/Getty Images Related article A big change could come to the US economy in September

“Current data are consistent with achieving a soft landing, and I will be looking for data over the next couple months to buttress this view,” Fed Governor Christopher Waller, a key central banker, said earlier this month at an event in Kansas City. “While I don’t believe we have reached our final destination, I do believe we are getting closer to the time when a cut in the policy rate is warranted.”

Wall Street traders are overwhelmingly betting that the Fed will decide to cut rates in its September 17-18 meeting.

Fed Chair Jerome Powell hasn’t given a definitive signal that rate cuts are coming, but he has provided some subtle hints. Powell earlier this month told lawmakers that “elevated inflation is not the only risk we face,” pointing to how much the labor market has cooled recently. The Fed chief has said that unexpectedly higher unemployment would prompt the central bank to cut rates sooner, since in addition to stabilizing prices, the Fed is also responsible for maximizing employment.

“Prices are easing and growth is strong. We had some worries about slowing GDP last June but those haven’t panned out,” David Russell, global head of market strategy atTradeStation, said in a note Thursday. “The second half could be in good shape for the bulls. Goldilocks is getting stronger and the risk of stagflation is fading. There’s not much stag and not much ‘flation.”

As stocks settle after the trading day, levels might change slightly.

CNN’s Krystal Hur contributed to this report.

The US economy is pulling off something historic | CNN Business (2024)

FAQs

When did America's economy take off? ›

The modern American economy traces its roots to the quest of European settlers for economic gain in the 16th, 17th, and 18th centuries. The New World then progressed from a marginally successful colonial economy to a small, independent farming economy and, eventually, to a highly complex industrial economy.

Why has the US been an economic success? ›

America is the world's largest national economy and leading global trader. The process of opening world markets and expanding trade, initiated in the United States in 1934 and consistently pursued since the end of the Second World War, has played an important role in the development of American prosperity.

Why is the US economy important to the rest of the world? ›

The United States is the world's single largest importer and exporter of goods and services, and the largest exporter and importer of business services (Figure 4). It accounts for 14 percent of global goods imports and 9 percent of global services imports.

What do you know about the US economy? ›

The United States is a highly developed/advanced mixed economy. It is the world's largest economy by nominal GDP; it is also the second largest by purchasing power parity (PPP), behind China.

When was the US economy the worst? ›

In the United States, the Great Recession was a severe financial crisis combined with a deep recession. While the recession officially lasted from December 2007 to June 2009, it took many years for the economy to recover to pre-crisis levels of employment and output.

Which country has the best economy in 2024? ›

In 2024, the United States had the largest economy in the world, with a gross domestic product of just under 29 trillion U.S. dollars. China had the second largest economy, at around 18.5 trillion U.S. dollars.

Who has the strongest economy in the world? ›

The United States has been the world's largest and richest economy since 1960. Its economy is very diverse, with important sectors like services, manufacturing, finance, and technology driving its growth.

What are the biggest problems in the US? ›

Today, 62% of Americans say inflation is a very big problem, down from 70% in 2022.
  • Partisan differences in views of inflation. ...
  • Federal budget deficit. ...
  • Unemployment. ...
  • Illegal immigration. ...
  • Crime and gun violence. ...
  • Climate change. ...
  • Racism.
May 23, 2024

What are the 3 reasons the US has a wealthy economy? ›

10 Reasons Why America Is so Much Richer Than Other Rich Nations
  • (1) An entrepreneurial culture. ...
  • (2) A financial system that supports entrepreneurial activities. ...
  • (3) World class research universities. ...
  • (6) A culture and a tax-transfer system that encourages hard work and long hours.
Mar 13, 2017

Who controls the global economy? ›

Although governments do hold power over countries' economies, it is the big banks and large corporations that control and essentially fund these governments. This means that the global economy is dominated by large financial institutions.

Is Europe's economy better than the US? ›

In 2008, the United States and the euro-zone economies were roughly the same size. Today, the American economy is nearly twice the size of the euro zone. And it's not just one measure. Average European income is now 27 percent lower than in the United States, and average wages are 37 percent lower.

Which economy is bigger US or China? ›

Making allowances for these three factors, World Economics estimates that the Chinese economy is approximately 33% larger than of the United States, as of today.

What drives the US economy? ›

Services, such as finance, healthcare, education, and entertainment, now account for a substantial portion of GDP and employment. Trade hub: International trade is a cornerstone of the U.S. economy, with the nation being both a major importer and exporter of goods and services.

How is the US economy doing right now? ›

Real gross domestic product (GDP) increased at an annual rate of 2.8 percent in the second quarter of 2024, according to the "advance" estimate. In the first quarter, real GDP increased 1.4 percent.

What does the United States lead the world in? ›

The United States of America is a North American nation that is the world's most dominant economic and military power.

What year did the economy start to decline? ›

The Great Recession was the sharp decline in economic activity that started in 2007 and lasted several years, spilling into global economies. It is considered the most significant downturn since the Great Depression in the 1930s.

What happened to the US economy in 1975? ›

The economy began to emerge from its recession in the late spring of 1975. An upturn in the gross national product and industrial production was evident in the summer months and early fall. Inflation began to OA falling , from double‐digit figures, at an annual rate, to 7 to 8 percent.

When did America shift to a service economy? ›

Prior to 1967, the employment shift to the services sector was primarily the result of the relative decline in agriculture. Since 1967, the relative decline of employment in the goods sector has contributed the most to the shift.

When was America most prosperous? ›

Most observers would agree that the US, and in fact the world, economy boomed in the 1990s, providing Americans with a decade of unbridled economic prosperity. Nobel Prize-winning economist and author Joseph Stiglitz agrees that the 1990s were prosperous, but at serious cost.

Top Articles
Latest Posts
Recommended Articles
Article information

Author: Kimberely Baumbach CPA

Last Updated:

Views: 5944

Rating: 4 / 5 (61 voted)

Reviews: 92% of readers found this page helpful

Author information

Name: Kimberely Baumbach CPA

Birthday: 1996-01-14

Address: 8381 Boyce Course, Imeldachester, ND 74681

Phone: +3571286597580

Job: Product Banking Analyst

Hobby: Cosplaying, Inline skating, Amateur radio, Baton twirling, Mountaineering, Flying, Archery

Introduction: My name is Kimberely Baumbach CPA, I am a gorgeous, bright, charming, encouraging, zealous, lively, good person who loves writing and wants to share my knowledge and understanding with you.