Moderate Growth in Q2

Signs indicate a slowing US economic growth, highlighted by jobless claims averaging 235,000 per week, up from 211,000 in Q1, and soft retail sales rising only 0.2% over the past six months, lagging behind inflation. Although a recession has not yet occurred, increasing jobless claims and a slight inflation deceleration hint at the effects of diminished money supply since early 2022.

Real GDP is estimated to have expanded at a 2.1% annual rate in Q2, primarily due to a 2.1% increase in consumer spending, notably in goods and services. Business investment is projected to grow 1.7% and residential construction 4.9%, each contributing modestly to GDP growth.

Government purchases of goods and services increased by 1.7%, adding further support. However, an expanding trade deficit is expected to subtract 0.8 points from GDP growth, offset by an estimated 0.8 point contribution from inventory accumulation.

Overall, Q2 growth reflects resilience amidst tightening monetary conditions, but poses challenges ahead as these policies take effect.