Resilient Economy Sees Solid Growth Amidst Challenges
- Barry B
- Aug 2, 2023
- 1 min read
U.S. GDP outperforms expectations despite a weak manufacturing sector. In Q2 2023, the Gross Domestic Product (GDP), a broad measure of economic activity, rose at an annualized rate of 2.4%, exceeding consensus forecasts and up from 2% in Q1. Despite weak manufacturing, government and consumer spending, business investment, and inventory growth were strong, contributing to the robust economic growth.
Core PCE inflation falls but remains significantly above the Federal Reserve's target. The Core Personal Consumption Expenditures (PCE) Price Index, the Fed's preferred inflation indicator, was up 4.1% YoY in June, in line with forecasts. Despite the steep drop from a 4.6% rate in May, it remains significantly above the Fed's 2% target, indicating that tight monetary policy may continue.
Manufacturing sector struggles persist, marking the ninth consecutive month of contraction. The Institute of Supply Management's manufacturing index showed continued challenges in the sector, rising less than expected to 46.4. This is the ninth consecutive month the index has been below 50, indicating contraction and marking the longest stretch in about 15 years.
Overall, the U.S. economy remains resilient despite manufacturing sector challenges. Even with the Federal Reserve's aggressive monetary policy tightening and manufacturing struggles, the economy has shown remarkable resilience. Early forecasts suggest a possibility of even stronger growth in Q3 2023.
