The United States' Gross Domestic Product (GDP) expanded at an annual rate of 2.8% in the second quarter, the US Bureau of Economic Analysis' first estimate showed on Thursday. This reading followed the 1.4% growth recorded in the first quarter and came in above the market expectation of 2%.
Follow our live coverage of the US GDP report and the market reaction.
Further details of the report showed that the Gross Domestic Product Price Index rose 2.3% in the second quarter, coming in below the market expectation of 2.6%. Additionally, the core Personal Consumption Expenditures Price Index rose 2.9% on a quarterly basis, below the 3.7% increase registered in the first quarter but above analysts' estimate of 2.7%.
"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 noted in its press release.
Market reaction to US GDP data
The US Dollar (USD) gathered strength against its rivals with the immediate reaction to upbeat GDP data. At the time of press, the USD Index was up 0.1% on the day at 104.40.
US Dollar PRICE Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.02% | 0.36% | -0.23% | 0.27% | 0.89% | 0.71% | -0.50% | |
| EUR | -0.02% | 0.34% | -0.22% | 0.25% | 0.87% | 0.68% | -0.52% | |
| GBP | -0.36% | -0.34% | -0.53% | -0.07% | 0.55% | 0.33% | -0.86% | |
| JPY | 0.23% | 0.22% | 0.53% | 0.43% | 1.05% | 0.83% | -0.35% | |
| CAD | -0.27% | -0.25% | 0.07% | -0.43% | 0.62% | 0.44% | -0.77% | |
| AUD | -0.89% | -0.87% | -0.55% | -1.05% | -0.62% | -0.17% | -1.38% | |
| NZD | -0.71% | -0.68% | -0.33% | -0.83% | -0.44% | 0.17% | -1.21% | |
| CHF | 0.50% | 0.52% | 0.86% | 0.35% | 0.77% | 1.38% | 1.21% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
This section below was published as a preview of the US Gross Domestic Product data at 07:00 GMT.
- The United States Gross Domestic Product is seen expanding at an annualized rate of 2% in Q2.
- The current resilience of the US economy bolsters the case for a soft landing.
- Markets expect the US Federal Reserve to start its easing cycle in September.
The US Bureau of Economic Analysis (BEA) will publish the first estimate of the US Gross Domestic Product (GDP) for the April-June period on Thursday. The report is expected to show an economic expansion at an annual rate of 2%, following the 1.4% growth recorded in the prior quarter.
Forecasting US Gross Domestic Product: Deciphering the numbers
Thursday's economic agenda in the US features the unveiling of the initial GDP report for the second quarter, set to be disclosed at 12:30 GMT. Analysts anticipate that the first assessment will reveal a 2% growth rate for the world's largest economy in the April-June period, a moderately robust pace, especially when compared to the 1.4% expansion recorded in the preceding quarter.
According to the Federal Reserve (Fed) Bank of Atlanta’s latest GDPNow estimate published on July 17, the US economy grew at an annual rate of 2.7% in the second quarter. “The nowcasts of second-quarter real personal consumption expenditures growth and second-quarter real gross private domestic investment growth increased from 2.1% and 7.7%, respectively, to 2.2% and 8.9%,” notes the Atlanta Fed in its press release, explaining the impact of June Housing Starts and Industrial Production data on GDP.
When speaking at the post-meeting press conference following the May policy meeting, Fed Chairman Jerome Powell noted that the GDP growth has slowed noticeably from the 3.4% expansion seen in the last quarter of 2023, but he said that a key component of the GDP, private domestic purchases, was up 3.1%. This component is essentially seen as a good indicator of private-sector demand because it excludes exports and government purchases.
Market participants will also pay close attention to the GDP Price Index, which represents the changes in the prices of goods and services produced in the US, including those exported to other countries, while excluding prices of imports. Basically, the GDP Price Index shows the impact of inflation on the GDP. In the second quarter, the GDP Price Index is forecast to rise 2.6%, down from the 3.1% increase in the first quarter.
Finally, the GDP report will also include the quarterly Personal Consumption Expenditures (PCE) Price Index and core PCE Price Index data. These numbers will reveal whether the core PCE Price Index, the Fed’s preferred gauge of inflation, rose 0.1% on a monthly basis as expected.
Previewing the GDP data, “The Q2 GDP report released on Thursday will offer an early look at how strong the June consumer spending data is likely to have been,” said TD Securities analysts in a weekly report and added: “Based on our bottom-up expectations, we look for GDP growth to have strengthened to 2.3% q/q AR, up from 1.4% in the first quarter, with consumer spending and inventories likely acting as major catalysts.”
When will the GDP print be released, and how can it affect the USD?
The US GDP report will be published at 12:30 GMT on Thursday. In addition to the headline real GDP print, the change in private domestic purchases, GDP Price Index and the Q2 PCE Price Index figures could influence the US Dollar’s (USD) valuation.
Softer inflation readings for May and June, combined with growing signs of a cooldown in the US labor market, fueled into expectations for a Fed rate cut in September. According to the CME FedWatch Tool, a 25 basis points (bps) rate reduction in September is fully priced in. Moreover, markets see a nearly 50% chance that the Fed will opt for a second 25 bps cut in December, bringing the policy rate down to 4.75%-5% range by the end of the year.
The Q2 GDP report by itself is unlikely to change investors’ mind regarding the September policy move. A stronger-than-forecast GDP growth, especially if accompanied by a healthy increase in private domestic purchases, however, could cause investors to refrain from pricing in a second cut in December. In this scenario, the USD is likely to gather strength against its rivals as the immediate reaction.
On the other hand, a disappointing GDP print and a noticeable decline in the quarterly core PCE inflation could keep market participants’ optimism about additional Fed easing. In this case, risk flows are likely to dominate the action and make it difficult for the USD to find demand.
Eren Sengezer, European Session Lead Analyst at FXStreet, shares a brief technical outlook for the USD Index (DXY):
“The 200-day Simple Moving Average aligns as a key pivot level for the DXY at 104.30. In case the index confirms that level as support, it could face strong resistance at 104.80-105.00, where the 100-day, 50-day and the 20-day SMAs converge, before targeting 105.50 (static level). On the downside, static support seems to have formed at 103.70 ahead of 103.00 (psychological level, static level) and 102.35 (March 8 low), in case the 200-day SMA turns into resistance.”
GDP FAQs
A country’s Gross Domestic Product (GDP) measures the rate of growth of its economy over a given period of time, usually a quarter. The most reliable figures are those that compare GDP to the previous quarter e.g Q2 of 2023 vs Q1 of 2023, or to the same period in the previous year, e.g Q2 of 2023 vs Q2 of 2022. Annualized quarterly GDP figures extrapolate the growth rate of the quarter as if it were constant for the rest of the year. These can be misleading, however, if temporary shocks impact growth in one quarter but are unlikely to last all year – such as happened in the first quarter of 2020 at the outbreak of the covid pandemic, when growth plummeted.
A higher GDP result is generally positive for a nation’s currency as it reflects a growing economy, which is more likely to produce goods and services that can be exported, as well as attracting higher foreign investment. By the same token, when GDP falls it is usually negative for the currency. When an economy grows people tend to spend more, which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation with the side effect of attracting more capital inflows from global investors, thus helping the local currency appreciate.
When an economy grows and GDP is rising, people tend to spend more which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold versus placing the money in a cash deposit account. Therefore, a higher GDP growth rate is usually a bearish factor for Gold price.
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