GDP Revision Signals Economic Trends for 2024

In recent economic data, the Commerce Department reported a revision of the second quarter GDP, increasing it by two-tenths of a percent, along with personal consumption expenditures reflecting a half-percent rise in consumer spending. Gus Fosche, Chief Economist at PNC Financial Services Group, notes that while economic growth is continuing into the summer of 2024, the pace is slowing, which could have positive implications for inflation rates. The shift suggests that the Federal Reserve may have the leeway to implement rate cuts in the upcoming months. Specifically, Fosche anticipates a gradual reduction of 25 basis points in the FED funds rate starting in September unless faced with significantly poor job reports. Despite recent surveys indicating that a quarter of low-income consumers expect difficulty with bill payments, overall consumer balance sheets remain healthy. This poses interesting challenges ahead as GDP growth continues at a modest pace amidst mixed economic indicators. The job market shows signs of resilience but is adjusting from previously stellar performance. A forthcoming payroll report is expected to show job additions in line with broken down forecasts. Key factors to watch include the impact of aging demographics on workforce participation, especially as baby boomers retire, and the potential role of immigration in sustaining economic growth.