Updated Jul 28, 2023 - Economy

After strong GDP surprise, analysts grapple with recession forecasts

Data: U.S. Bureau of Economics Analysis; Chart: Axios Visuals

New numbers released Thursday showed the U.S. economy expanded at a perkier-than-expected rate in the second quarter.

Why it matters: Earlier this year, there was a lot of talk among investors and economists that the U.S. was likely hit a recession in 2023. It hasn't.

The numbers: Gross domestic product — the broadest measure of the U.S. economy — grew at a 2.4% annual rate last quarter.

  • Analysts had expected a reading of 1.5%.
  • Consumer spending stayed robust, and businesses boosted investments — particularly in manufacturing — helping to drive growth.

🗣 What they're saying: Many are grappling with their expectations of a downturn.

  • "While we remain in the recession camp, we admit that a soft landing isn't impossible. It's been difficult to forecast the post-pandemic economy," wrote economists at Oxford Economics.
  • "Overall, while the acceleration in second-quarter GDP growth would seem to make a mockery of forecasts (including ours) that the economy is headed for recession," wrote Capital Economics analysts.

Yes, but: Of course, there's no guarantee that what looks like a strong economy now will remain that way. Financial crises, energy shocks, and all manner of unpredictable events could upend an otherwise solid economy at any time.

  • As analysts at brokerage firm Piper Sandler wrote, "This doesn’t change our outlook that a recession is likely to start in 4Q, based on our leading indicators."
  • And of course, growth isn't everything. There are plenty of parts of the U.S. where people are struggling with really high costs of basics such as housing.

The bottom line: But growth-wise, things are looking pretty solid.

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