Morning Market Brief: July 26, 2024

Morning Market Brief: July 26, 2024

US economic growth accelerates 

A preliminary estimate showed US economic growth expanded in the second quarter of 2024, and at a faster pace than in the first quarter. Despite tight financial conditions brought on by high inflation and extensive rate hikes from the US Federal Reserve Board (Fed), the US economy is proving its resiliency, raising expectations it might be able to avoid a deep recession and allow the Fed to deliver a soft landing. 

  • The US economy grew by 2.8%, annualized, in the second quarter of 2024. This topped the 1.4% rate of growth in the first quarter. A Bloomberg survey showed economists were expecting a 2.0% annualized increase.
  • Consumer spending was a key contributor to growth over the quarter, rising by 2.3%. This was faster than the 1.5% increase in the previous quarter. An increase in business investment and government spending also positively contributed to growth over the quarter.
  • Conversely, residential investment weakened over the quarter, marking its first contraction since early 2023. The US housing market has struggled amid relatively weak demand given high mortgage rates. Data earlier this week showed this softness continued into June, with existing home sales declining for a fourth straight month.
  • While second-quarter growth topped economists’ estimates and growth from the first quarter, it is down compared to last year, which suggests economic conditions in the US are indeed slowing.

After such an important announcement, attention will turn to the Fed, which makes its next interest-rate announcement on July 31. Stronger-than-expected growth could keep the Fed on the sidelines from beginning to lower rates. As the Fed looks to navigate the US economy through a soft landing, yesterday’s economic growth data points to a strong potential for them to achieve that goal.

At CIBC Private Wealth, we aim to take a comprehensive approach to managing, building and protecting your wealth. If you'd like to discuss this market and economic update in more detail, please get in touch with your advisor any time.

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