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Something is happening to the US economy only seen once before
The US economy accelerated last quarter, with consumers and businesses increasing their spending despite the continual pressure of high interest rates.
Economists said that this could mean the economy is on track to stick a so-called 'soft landing.' This has only ever happened once, they say - and it is good news for the stock market.
This rare slowdown is when the rate of inflation returns to the Federal Reserve's 2 percent target without triggering a recession.
Gross domestic product (GDP) - a measure of all the goods and services produced in the US - rose at an annual rate of 2.8 percent for April through June to $22.9 trillion, according to Commerce Department figures released Thursday.
This was faster than the first quarter growth and well above the annual rate economists had predicted - in a powerful show of the resilience of the US economy.
GDP rose at an annual rate of 2.8 percent for the quarter from April through June 2024
The GDP report showed that businesses are continuing to invest and household spending remains strong.
This is crucial because consumer spending makes up around two-thirds of economic output in the US.
Stocks rose after the release of the report, with the Dow Jones Industrial Average up around 0.6 percent initially.
Wall Street wants a soft landing - which is why stocks rose slightly today after declines in recent days.
A strong stock market is good for 401(K)s and other retirement accounts - which are mostly invested in indices like the Dow, the Nasdaq and the S&P and via shares of individual US companies like Apple.
Alongside the growth of the economy, inflation also resumed a downward trend in the three months to June, heading closer toward the Fed's 2 percent target rate.
The annual rate of inflation was 3 percent in June, falling 0.1 percent month on month from May.
The latest figures should reinforce confidence that the US economy is on the verge of achieving a rare 'soft landing,' CNN reported.
This feat has only happened once, during the 1990s, according to some economists.
Experts have long predicted that the high borrowing costs brought in by successive interest rate hikes would tip the US into a recession, but it has instead remained enduringly strong.
Fed officials have made it clear that they would consider cutting interest rates as inflation edges towards their target, something they are widely expected to do in September.
The Fed will be reassured by Thursday's GDP report, Bill Adams, chief economist at Comerica Bank told Associated Press.
'With inflation trending lower...the Fed thinks that it's getting close to the time to cut interest rates.'
The annual rate of inflation was 3 percent in June - above the Fed's 2 percent target
Fed officials have made it clear that they would consider cutting interest rates as inflation edges towards their target (Pictured: Federal Reserve Chair Jerome Powell)
Interest rate reductions by the Fed would, over time, reduce consumers' borrowing costs for services like mortgages, auto loans and credit cards.
Though inflation has dropped significantly from its 40-year high of 9.1 percent in June 2022, stubborn inflation has meant prices for many everyday goods remain well above pre-pandemic levels.
According to Labor Department data, food prices have risen 20 percent in the last five years.
The cost of some everyday essentials has jumped much more - with eggs and milk now costing double what they did in 2019.