Markets 'Should Breathe A Sigh Of Relief,' Economist Says: New GDP Report 'Is Very Impressive'

The U.S. economy is much stronger than people realize, Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, said on Thursday.

To the extent that markets were worried about a growth slowdown, Zaccarelli added, they “should breathe a sigh of relief” after this morning's GDP number.

“The 2.8% growth in the economy above and beyond inflation is very impressive, and the recent pullback in stocks will likely prove to be a buying opportunity,” he said.

While “more volatility” is expected ahead of the November election, the current bull market will continue well into 2025 if the economy does not go into a recession.

Gross domestic product, adjusted for inflation, advanced at a 2.8% annual rate in the second quarter, according to the U.S. Bureau of Economic Analysis.

That is up from an annual rate of 1.4% for the first quarter and faster than forecasters' expectations, but it was down from the unexpectedly strong growth in the second half of last year, the New York Times reported.

“The increase in real GDP primarily reflected increases in consumer spending, private inventory investment, and nonresidential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased,” the BEA said on Thursday.

Read Also: GDP Q2 Preview – 5 ETFs To Monitor Thursday As Economic Data Unfolds

“The increase in consumer spending reflected increases in both services and goods. Within services, the leading contributors were health care, housing and utilities, and recreation services. Within goods, the leading contributors were motor vehicles and parts, recreational goods and vehicles, furnishings and durable household equipment, and gasoline and other energy goods.”

Real GDP accelerated in the second quarter primarily due to an upturn in private inventory investment and increased consumer spending, both of which were offset by a decrease in residential fixed investment, the BEA said.

Current dollar GDP increased 5.2% at an annual rate, or $360 billion, in the second quarter to $28.63 trillion, compared to an increase of 4.5%, or $312.2 billion in the prior quarter.

The price index for gross domestic purchases increased 2.3% in the second quarter, compared with an increase of 3.1% in the first quarter. The personal consumption expenditures (PCE) price index gained 2.6%, compared with an increase of 3.4%.

Excluding food and energy prices, the PCE price index increased 2.9% in the second quarter, compared with an increase of 3.7% in the first quarter.

Personal income picked up in the second quarter, but personal savings declined, according to the BEA.

Current-dollar personal income increased $237.6 billion in the second quarter, compared with an increase of $396.8 billion in the first quarter.

“The increase primarily reflected increases in compensation and personal current transfer receipts,” the BEA said.

Disposable personal income went up $186.3 billion, or 3.6%, in the second quarter, compared with an increase of $240.2 billion, or 4.8%, in the first quarter. Real disposable personal income increased 1%, compared with a 1.3% in the prior quarter.

Personal savings came in at $720.5 billion in the second quarter, down from $777.3 billion in the first quarter. The personal saving rate — personal saving as a percentage of disposable personal income — was 3.5% in the second quarter, compared with 3.8% in the first quarter.

The latest data bodes well for Democratic candidates, citing a healthy economy under the Biden administration this election year. Republican candidates, following GOP nominee Donald Trump‘s lead, argue the contrary.

Read Now:

• GDP Growth Upwardly Revised In Q1 But Consumer Spending Weakens, Continuing Jobless Claims Hit Nearly 3-Year Highs: Thursday’s Economic Digest

Image: Shutterstock