The US economy grew at a faster-than-expected pace in the second quarter.
The Bureau of Economic Analysis' preliminary estimate of US gross domestic product (GDP) for the first quarter showed the economy growing at an annual rate of 2.8% in the period, well above the 2% growth expected by economists polled by Bloomberg. This reading was higher than first quarter GDP, which was revised down to 1.4%.
Meanwhile, the "core" Personal Consumption Expenditure index, which excludes volatile food and energy categories, grew by 2.9% in the first quarter, above estimates of 2.7%. However, this figure is much lower than the 3.7% increase in the previous quarter.
The release of this data comes as investors try to assess when the Federal Reserve will begin cutting interest rates and if the central bank can achieve a soft landing, where inflation falls to its 2% target without a significant economic slowdown.
By Thursday, the market had pegged expectations at a 100% probability that the Fed would cut interest rates by the end of its meeting in September.
"Today's data will reinforce the notion that the Fed has a timing advantage," wrote Renaissance Macro's head of economic research, Neil Dutta, in a note after Thursday's release. "In the Fed's mind, it may not need to rush with private domestic demand growing at a strong rate throughout the second quarter. July remains a preparatory meeting for September.”
