US economic growth for last quarter is revised up to a solid 3% annual rate. Improved economic data in July shows positive signs for Thailand's economy. Despite dwindling savings, economists aren't worried. Stay informed about the latest economic updates and their implications for various sectors.
Sources:
https://www.journal-news.net/journal-news/us-economic-growth-for-last-quarter-is-revised-up-to-a-solid-3-annual-rate/article_c2dfb75c-a08e-56bf-b3e2-c1dfb84459a4.html
https://www.bangkokpost.com/business/general/2856877/improved-economic-data-in-july
https://www.marketplace.org/2024/08/30/americans-are-spending-a-lot-and-not-saving-much-economists-arent-too-worried-yet/
https://www.marketplace.org/2024/08/30/americans-are-spending-a-lot-and-not-saving-much-economists-arent-too-worried-yet/
Outline:
(00:00:00) Introduction
(00:00:38) US economic growth for last quarter is revised up to a solid 3% annual rate
(00:04:05) Improved economic data in July
(00:07:29) Despite dwindling savings, economists aren't worried
(00:09:47) Despite dwindling savings, economists aren't worried
Simply Economics
US Economy Grows at Solid 3% Rate, Thailand’s Economic Performance Improves
US economic growth for last quarter is revised up to a solid 3% annual rate. Improved economic data in July shows positive signs for Thailand's economy. Despite dwindling savings, economists aren't worried. Stay informed about the latest economic updates and their implications for various sectors.Sources:https://www.journal-news.net/journal-news/us-economic-growth-for-last-quarter-is-revised-up-to-a-solid-3-annual-rate/article_c2dfb75c-a08e-56bf-b3e2-c1dfb84459a4.htmlhttps://www.bangkokpost.com/business/general/2856877/improved-economic-data-in-julyhttps://www.marketplace.org/2024/08/30/americans-are-spending-a-lot-and-not-saving-much-economists-arent-too-worried-yet/https://www.marketplace.org/2024/08/30/americans-are-spending-a-lot-and-not-saving-much-economists-arent-too-worried-yet/Outline:(00:00:00) Introduction(00:00:38) US economic growth for last quarter is revised up to a solid 3% annual rate(00:04:05) Improved economic data in July(00:07:29) Despite dwindling savings, economists aren't worried(00:09:47) Despite dwindling savings, economists aren't worried
- Duration:
- 13m
- Broadcast on:
- 31 Aug 2024
- Audio Format:
- mp3
Good morning and welcome to Simply Economics. It's Saturday, August 31st. On today's show, U.S. economic growth for last quarter is revised up to a solid 3% annual rate and we have improved economic data in July. Plus, despite dwindling savings, economists aren't worried. This coverage and more up next. I'm David and you're listening to Simply Economics. We start off with some positive news about the U.S. economy, which grew at a healthy 3% annual pace in the second quarter, fueled by strong consumer spending and business investment. This is an upgrade from the Commerce Department's initial estimate of 2.8% growth. This second quarter marked a sharp acceleration from the sluggish 1.4% growth rate in the first three months of 2024. For more on this, we turn to our Simply Economics correspondent. So, what drove this economic growth in the second quarter? Consumer spending, which accounts for about 70% of U.S. economic activity, rose at a 2.9% annual rate last quarter. That's up from the initial estimate of 2.3%. This investment also expanded at an impressive 7.5% rate, led by a 10.8% jump in investment in equipment. These figures reflect an economy that remains resilient despite the pressure of continued high interest rates and how are consumers feeling about the economy right now, especially with the presidential election coming up in November. Measures of consumer confidence by the conference board and the University of Michigan have shown a recent uptick. Many Americans remain frustrated by high prices, even though inflation has plummeted since peaking at a four-decade high in mid-2022. But the recent GDP revisions show the U.S. economy was in good shape in mid-2024, and the increase in consumer confidence in July suggests it will continue to propel growth in the second half of the year as well. What about inflation? The Federal Reserve has been aggressively raising interest rates to combat rising prices. Where do we stand on that front? The latest GDP estimate included figures showing that inflation continues to ease while remaining just above the Federal Reserve's 2% target. The Fed's favored inflation gauge, the Personal Consumption Expenditures Index, or PCE, rose at a 2.5% annual rate last quarter, down from 3.4% in the first quarter. During volatile food and energy prices, core PCE inflation grew at a 2.7% pace, down from 3.2% from January through March. These numbers are a slight improvement from the government's first estimate. So with inflation hovering only slightly above the Fed's target and likely slowing further, what does this mean for interest rates going forward? Fed Chair Jerome Powell has essentially declared victory over inflation. As a result, the Fed is poised to start cutting its benchmark interest rate when it next meets in mid-September. A sustained period of lower Fed rates would be intended to achieve a soft landing, where the central bank Curbs inflation, maintains a healthy job market, and avoids triggering a recession. Lower rates for auto loans, mortgages, and other forms of consumer borrowing would likely follow. And finally, what about the job market? How is it holding up amidst all of this? The job market has been gradually weakening, with the unemployment rate rising for four straight months to 4.3%. However, this is still low by historical standards. Job openings and the pace of hiring have also dropped, though they remain at relatively solid levels. The Fed has recently become more concerned about supporting the job market than continuing to fight inflation. Thank you for that comprehensive update on the state of the U.S. economy. It will certainly be interesting to see how things continue to evolve in the coming months. Meanwhile, economic data in Thailand showed improvement in July compared to the previous month, according to the Bank of Thailand. The central bank reported that rising external demand reflected in both exports and tourism revenue drove this positive change. For more on this, we turn to our correspondent. Can you give us some specifics on what drove the increase in tourism? The number of foreign tourist arrivals after seasonal adjustment rose to $3.1 million in July compared to $2.7 million in June. This increase was mainly attributed to higher visitor numbers from Malaysia, China, Russia, and Europe. However, tourist arrivals from the Middle East and India did decline. Interestingly, tourism revenue also grew due to higher average spending per visitor, especially by tourists from Russia and Germany. And what about the export sector? How did that perform in July? Merchandise exports, excluding gold and adjusted for seasonality, grew 2.8% month on month in July. This increase was seen across several categories, including electronic products, agromanufacturing products, and chemical and petrochemical products. Some of this growth was attributed to precautionary action by exporters against potential shipping delays in recent and upcoming periods. However, exports of certain products such as pickups to Australia, the Philippines and the Middle East, did see a decline. How did the manufacturing sector fare in July? Were there any notable trends? The Manufacturing Production Index, after seasonal adjustment, increased from the previous month across several categories. Auto production rose to support near-term exports, which had been affected by geopolitical conflicts in the Middle East. The rubber and plastic sector also posted positive growth. Other sectors benefited from increased production of machinery, such as electric motors and transformers. However, petroleum output did decline after expanding in the previous month. Despite these positive indicators, were there any areas of concern in the Thai economy in July? While private consumption indicators remained steady compared to June, consumer confidence continued to fall. This was driven by concerns over elevated living costs, slow economic growth, and political uncertainty. Business sentiment regarding investment also continued to decline, especially in the auto, real estate, and retail sectors. So while there were bright spots in exports and tourism, domestic consumption and investment remain areas to watch closely. Finally, how did the Thai bot perform against the U.S. dollar in July? What factors influenced its movement? The bot appreciated against the U.S. dollar in July based on weaker than expected U.S. economic data and easing inflation. The market now anticipates a Federal Reserve interest rate cut, which also contributed to the bot's appreciation. Rising gold prices also put upward pressure on the Thai currency. The central bank is monitoring the bot's movement closely, given its volatility, but also notes better management of foreign exchange risk among local businesses via hedging instruments. Thank you for that comprehensive overview of Thailand's economic performance in July. While there are some encouraging signs, it's clear that both global and domestic factors continue to influence the country's economic trajectory. Speaking of economic trends, let's shift our focus to the U.S., where Americans are spending a lot and not saving much, according to the latest personal consumption expenditure's data. The savings rate dipped to its lowest level in over two years in July, while consumer spending increased. This trend has some economists concerned about long-term sustainability. For more on this, let's turn to our economics correspondent. So what's driving this spending behavior despite the low savings rate? There are a few factors at play here. On one hand, the increased consumer spending is a sign of a strong economy with wage growth outpacing inflation and giving people more purchasing power. Consumers seem to be making up for lost time after the pandemic restrictions. However, to fund this spending spree, many Americans are relying more on debt since their savings have dwindled. It's a trend that can't continue indefinitely. How concerning is this low savings rate from an economic perspective? Is it approaching dangerous territory? The savings rate itself isn't necessarily at crisis levels yet, but the trajectory is worrying if it continues downward. Economists note that savings rates were unusually high early in the pandemic when spending options were limited. So in some ways, this is a normalization process. However, if wage growth slows and people increasingly rely on debt to maintain their lifestyles, it could lead to financial instability down the road. Despite these concerns, some economists remain optimistic about the overall economic picture and the risk of a recession. What's behind that view? The optimists point to the strong labor market and the fact that inflation has been moderating in recent months. As long as job growth remains solid and wages rise, consumers will have money to spend. There's also a sense that we may be hitting an economic sweet spot with growth continuing steadily without overheating. However, that perspective could change quickly if employment numbers start to disappoint. That's an important point about the upcoming jobs data. Numbers showing a slowdown could shift the narrative back towards recession fears, a situation that bears close watching in the weeks and months ahead. Speaking of economic indicators, recent data from the Bureau of Economic Analysis shows that Americans are spending a lot and not saving much. The personal savings rate dipped to its lowest level in over two years in July, while consumer spending increased. This has some economists concerned about the sustainability of this trend. For more on this, let's bring in our economics correspondent. So what do you make of these latest numbers? The increased consumer spending is certainly a positive sign for the strength of the economy. Wage growth is outpacing inflation, giving consumers more purchasing power. However, the fact that the savings rate has fallen to just 2.9 percent, the lowest since June 2022, does raise some red flags. It suggests that Americans are relying more on debt to fund their spending habits rather than savings. While this isn't necessarily a huge concern yet, it's a trend that bears watching. Some economists have described the current consumer spending as being like drunken sailors. Is that an accurate characterization, and is this level of spending sustainable? The drunken sailor's analogy is a bit of an exaggeration, but it does capture the free-spending mood of many consumers right now. And no, this pace of spending growth likely can't be sustained indefinitely. However, it's important to remember the context. Savings rates were unusually high early in the pandemic when spending opportunities were limited. What we're seeing now is a normalization, a return to more typical savings and debt levels for households. So while it may not be ideal from a financial planning perspective, it's not necessarily a sign of impending doom. There are some who believe that despite these savings and debt trends, the overall economic picture is still quite positive. They point to the strong job market and falling inflation as reasons not to be too concerned about a potential downturn. What's your take on that perspective? There is certainly a case for optimism. The labor market remains robust, and if wage growth continues to outpace inflation, that could provide ongoing support for consumer spending. Some economists believe we've hit a sweet spot with solid economic growth and moderating inflation. However, next week's employment data will be telling. If the recent trend of slowing job growth continues, it could undermine some of the positive sentiment. For now, though, the prevailing view seems to be that the economy is still on fairly solid footing, despite the dip in savings and rise in consumer debt. As always, a lot to unpack and monitor in the world of economics. Thank you for your insights. We'll continue to keep a close eye on the data and trends in the weeks and months ahead as we wrap up our stories for today. Thanks for listening to Simply Economics. We'll see you back here tomorrow. [MUSIC] [BLANK_AUDIO]