Broad-based Strength Behind Unexpected Pick-Up in GDP

Economics Group of Wells Fargo Bank, N.A. Summary This morning’s economic data offer the latest evidence that the U.S. economy is weathering the fastest rate hikes in a generation without much damage to the major gear-works of the economy. Second quarter GDP growth came in hot, fueled by a rebound in capex spending. June durable goods orders were stronger and fewer people are filing claims for jobless benefits in the latest weekly data. The path to avoiding recession looks clearer today than it did even a few weeks ago. You Can’t Import a Concert: Strong PCE Amid Falling Imports The economy expanded at a 2.4% annualized rate in the second quarter (chart). That is technically a faster rate of growth compared to the prior period, although first quarter growth would have been stronger had it not been for a big drag from inventories that lopped off more than two percentage points of growth in that period. We expected a more modest boost from inventories in Q2 although the scant +0.14 percentage point boost was even smaller than we thought. Roughly half of second quarter growth came from real personal consumption (PCE) which expanded at a 1.6% annualized clip. That is less than half the pace at which PCE expanded in Q1 and points to the fact that while consumers have been resilient, it is not as though there are no signs of slowdown. READ FULL ARTICLE >>