The American economy is growing at the fastest pace in nearly two years after official statistics were upgraded on the back of strong consumer spending and falling imports.
The world’s largest economy expanded by 3.8 per cent on an annualised measure in the second quarter, the fastest since the third quarter of 2023 and up from an initial estimate of 3.3 per cent. The figures were the best in the G7 group of the world’s advanced economies and a recovery from the 0.6 per cent annualised contraction in the first quarter, according to the US Bureau of Economic Analysis.
The US economy has bounced back after a surge in imports hit the economy at the start of the year when companies and households rushed to buy foreign goods ahead of impending tariffs. Finance, information and communications technology and manufacturing were the best performing parts of the economy in the three months to June. Consumer spending and a measure of private sector investment expanded by 2.9 per cent in the quarter, which was revised up 1 percentage point from the previous estimate.
A separate measure of the labour market was also better than expected, with weekly jobless claims falling from 232,000 to 218,000. The figure was below a forecast of 240,000 and showed that the slowdown in employment growth was not leading to major job losses. A monthly measure of consumer goods orders also bounced back, expanding by 2.9 per cent in August, reversing a 2.8 per cent contraction in July.
Investors bought the dollar and sold US government bonds in response to the strong set of economic data. The greenback gained 0.27 per cent against a basket of currencies to a two-week high, while the price of short-dated Treasury bonds fell, pushing up yields on two-year debt by 0.04 percentage points to 3.64 per cent. Yields on ten-year Treasuries gained 0.03 percentage points to 4.18 per cent.
Alexandra Brown at Capital Economics said the economy was likely to have expanded at a similar pace in the third quarter. “The mother lode of data just released suggest the economy is still doing just fine, despite the slowdown in employment growth,” she said.