A recent report from the Bureau of Economic Analysis revealed that the advance estimate for US GDP growth stands at an annualized rate of 2.8%, surpassing the 2.0% forecast previously noted on Investing.com and the 1.4% growth experienced in the first quarter. This data suggests a shift in the US economy towards a 'soft landing,' characterized by milder inflation and a deceleration in the job market.
Key indicators point to a slowdown in inflation and wage growth, with the 30-year fixed-rate mortgage showing a decline while remaining above 6%. Despite the uptick in the unemployment rate from its historic low, layoffs and discharges have generally remained low. The leisure and hospitality sector is experiencing sluggish monthly job growth, indicating a broader economic adjustment.
Mark Zandi, Chief Economist at Moody's Analytics, highlighted that much of this economic moderation is intentional. The Federal Reserve's deliberate actions, including aggressive federal funds rate hikes in 2022 and the first half of 2023, aim to temper aggregate demand, cool the robust job market, and alleviate wage and price pressures.
Looking ahead, the Federal Open Market Committee is scheduled to convene at the end of July, with no expectations for an immediate rate cut. However, some economists argue that a shift in monetary policy is warranted. Claudia Sahm, Chief Economist at New Century Advisors and former Fed economist, emphasized that maintaining high interest rates could impede consumer spending and business investment, necessitating a reevaluation of the current approach.
As the situation continues to evolve, it is essential to stay informed and monitor updates on this developing economic narrative.
