The first estimate of the U.S. GDP showed the economy growing by 2.8% in Q2 2024. That’s much faster than the expected 2.5% increase and almost double the downwardly revised 1.4% growth in the previous quarter!
The Commerce Department detailed that the acceleration in growth from Q1 to Q2 was mainly due to an upturn in private inventory investment and an acceleration in consumer spending.
True enough, consumer spending accelerated from 1.5% to 2.3% and upped its GDP contribution from 0.98% to 1.57%.
Private inventories, which had been a drag in the last two quarters, added about 0.98% to the GDP computation and offset the 0.72% drag from a trade gap caused by imports rising at its fastest rate since Q1 2022.
Inflation measures included in the report showed easing price pressures:
- PCE price index weakened from 3.4% to 2.6%
- Core PCE price index edged lower from 2.9% to 3.7%
- Price index for gross domestic purchases slowed from 3.1% to 2.3%
Link to the BEA Advance Q2 2024 GDP Estimate
Meanwhile, a separate release showed durable goods (read: long-term) purchases by manufacturers falling by 6.6% m/m in June, weaker than the expected stagnation and the 0.1% uptick in May.
The more closely-watched core durable goods orders grew by 0.5%, stronger than the expected 0.2% uptick and May’s 0.1% decrease.
Link to the Census Bureau Durable Goods Report
Last but not least, a weekly labor market report reflected 235K initial jobless claimants in the week ending July 20.
Analysts had expected 247K claimants after the previous week’s 245K reading.
Link to the Labor Department’s Weekly Claims Report
Market Reactions
U.S. dollar vs. Major Currencies: 5-min
Overlay of USD vs. Major Currencies Chart by TradingView
The U.S. dollar, which had been trading in ranges (except against the yen) ahead of the releases jumped against JPY and CHF at the much-better-than-expected Q2 GDP reading. However, it also lost pips against its other major counterparts.
One possible reason for the mixed reaction is that some traders had shrugged off the impact of the backward-looking report on the Fed’s interest rate cut timeline. The heavy decline in the headline durable goods orders report didn’t help either.
The Greenback started turning lower against JPY and CHF less than an hour after the GDP release and soon saw broader weaknesses, likely as more traders got more comfortable buying “riskier bets like bitcoin and comdolls.
Luckily for USD bulls, the dollar regained some ground in the second half of the U.S. session and helped the currency end the day in the green against all of its counterparts except for the euro and the Swiss franc.
