According to the revised US government statistics, the US economy has rebounded much stronger from the short-term recession caused by the COVID-19 pandemic than expected by economists and previously announced by the US government. This is mainly driven by the much stronger growth in consumer spending in 2022 and 2023. The resilience of consumer spending will undoubtedly continue to propel the US economy forward, as 70%-80% of the components of the US GDP are closely related to consumption. Looking ahead to the future of the US economy, after the Federal Reserve cut interest rates by 50 basis points to start an easing cycle, many institutions including Goldman Sachs believe that the US economy is getting closer to a &#34;soft landing&#34; - successfully lowering inflation through an aggressive rate hike cycle while maintaining stable economic growth.
The comprehensive annual update from the US Bureau of Economic Analysis shows that from the second quarter of 2020 to the end of 2023, the average inflation-adjusted growth rate of the US Gross Domestic Product (GDP) is 5.5%. This revised figure is significantly more optimistic compared to the previously announced 5.1% growth rate.
For the final value of the US GDP annualized quarterly rate in the second quarter, it maintains the optimistic growth rate of 3% announced earlier, with the rebound from the previous quarter mainly reflecting accelerated growth in US consumer spending, inventory investment, and business spending, indicating that the US Q2 economic output continues to achieve strong growth. In the first quarter of this year, the US government revised the GDP growth rate from the previously reported 1.4% to the latest final value of 1.6%. The strong economic growth data in Q1 and Q2, combined with the Federal Reserve's 50 basis point rate cut, significantly boost investors' confidence in the US economy successfully achieving a &#34;soft landing&#34;.
Overall, the revised annual data shows that in the five years leading up to 2023, economic growth is $294.2 billion higher than the figures reported by the US government. About two-thirds of the revision is due to a significant increase in consumer spending.
The US Bureau of Economic Analysis has revised the US economic growth rate for the entire previous year from 2.5% to 2.9%, with adjustments concentrated in the first half of the year. Overall, the expansion pace of the US Gross Domestic Product (GDP) remains robust, but the annualized quarterly rates for the third and fourth quarters have been revised downward.
The actual US Gross Domestic Product grew by 2.5% in 2022, 0.6 percentage points higher than the previously reported data. Additionally, the latest data shows that in that year, only the first quarter saw a decline in GDP annualized quarterly rate, rather than the technical economic recession indicated by two consecutive quarters of decline in the initial GDP data report.
The final revised government data also shows an upward revision in the US Gross Domestic Income (GDI) for 2023. The inflation-adjusted growth rate of last year's GDI has significantly increased from 0.4% to 1.7%.
<h2>Overall Trend of US GDP After the Latest Revision, Strong Recovery Since the COVID-19 Pandemic</h2>
In this updated GDP data section, two things stand out: the upward revision of the GDP in the second quarter of 2022 and a slight slowdown in economic growth in the second half of last year. Although still strong, the GDP growth rate for the third quarter of 2023 was revised down by 0.5 percentage points to 4.4%, and the fourth quarter GDP growth rate was revised down by 0.2 percentage points to 3.2%, indicating a slight weakening of the momentum as the US economy enters 2024
However, the good news is that the final annualized quarterly growth rate of the US real GDP for the second quarter of 2024 remains at 3%, with no revisions, while the first quarter of 2024 has been slightly revised upwards.
<img src="https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20240926/1727359304918706.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="1727359292(1).png" original-src="https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20240926/1727359304918706.png"/>
GDP Revision - Overall Trend of GDP Revised Upwards, but Momentum Slows Down at the End of 2023
For 2022, the US government unexpectedly revised the second quarter GDP from a 0.6% decline to a 0.3% growth. Previously, data showed GDP declining for two consecutive quarters, meeting the traditional definition of an economic technical recession, but in the US, only the team of economists at the National Bureau of Economic Research (NBER) considers an economic recession in the US to be an official certification of an economic recession.
It is worth noting that this latest annual revision final value brings the Gross Domestic Income (GDI) indicator (total income received by all sectors in the economy, including wages, corporate profits, taxes, and rental income, but excluding government subsidies) closer to GDP. Updated data from the US Bureau of Economic Analysis shows that the government department raised US national income by $240 billion in 2022 and nearly $559 billion in 2023.
In theory, GDP and GDI should be roughly equal, but in reality, these indicators occasionally provide vastly different economic conditions. The latest revision helps to narrow the gap between the two. In 2023, the US GDI growth rate was revised up from 0.4% to 1.7%. The growth rate of GDI in 2022 was revised up from 2.1% to 2.8%, and in 2021, it was revised up by 0.5 percentage points.
The revision results show that some forms of additional income received by US residents are stronger than previously measured indicators. These types of personal income, including interest income, dividends, and rental income, all increased in 2023. This strength may help explain why US consumers have been more able to spend more freely since the onset of the COVID-19 pandemic than many economists had imagined.
<img src="https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20240926/1727359365753986.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="1727359362(1).png" original-src="https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20240926/1727359365753986.png"/>
GDI Statistical Indicator Upward Revision - Latest Revision Narrows Large Discrepancies in Measurement
The US government's annual updated data also shows that over the five years to 2023, overall corporate profits in the US have increased significantly. In 2023, overall corporate profits were revised up by as much as $288.5 billion
<h2>In 2023, inflation only slightly increased, and the U.S. economy achieved one of the strongest expansions since World War II</h2>
The updated revised data from the U.S. Bureau of Economic Analysis also shows that the preferred inflation measure for Federal Reserve officials - the Personal Consumption Expenditures Price Index (PCE) - only saw a slight increase in this still very hot year for U.S. inflation. The 2023 PCE statistical index rose by 3.8%, higher than the previous estimate of 3.7%. Excluding food and energy, the so-called core Personal Consumption Expenditures Price Index (core PCE) was 4.1%, with no revisions, remaining consistent with the previous value.
From the above data, it can be seen that after the pandemic caused a sudden downturn in the U.S. economy leading to a brief economic recession, the U.S. economy rebounded strongly even after experiencing high inflation and the Federal Reserve's aggressive interest rate hikes, raising the U.S. benchmark interest rate to 5.25%-5.5%, the highest level in over 20 years. This incredibly strong rebound reflects the epic stimulus effects of trillions of dollars in fiscal spending and the Fed's comprehensive QE following the pandemic.
Overall, the unprecedented rebound process of the U.S. economy since the second quarter of 2020 is one of the strongest economic expansion cycles in the U.S. economy since World War II.
The annual update from the U.S. Bureau of Economic Analysis is based on the latest available and revised data, including revisions from the first quarter of 2019 to the fourth quarter of 2023.
<h2>As the Fed's rate-cutting cycle begins, a &#34;soft landing&#34; for the U.S. economy seems imminent</h2>
After experiencing one of the strongest economic expansion cycles since World War II, looking ahead to the future of the U.S. economy, top Wall Street investment banks such as Goldman Sachs believe that the U.S. economy is very close to achieving the &#34;soft landing&#34; that the Federal Reserve has been longing for.
In terms of economic data, the latest unexpectedly revised GDP growth rate, along with the basic compliance and cooling trend of initial jobless claims in recent weeks - last week's initial jobless claims fell to a four-month low, and the continued expansion momentum of the crucial service sector PMI for the U.S. economy, coupled with the ongoing decline in inflation, perfectly align with the envisioned &#34;soft landing&#34; prospects for the U.S. economy by Federal Reserve officials.
With the significant slowdown in U.S. inflation and the unexpected 50 basis point rate cut by the Federal Reserve to start the rate-cutting cycle, this may provide significant relief for industries heavily impacted by high borrowing costs such as housing and manufacturing, and could potentially serve as a significant catalyst for accelerating U.S. economic growth by providing a boost to resilient U.S. consumer spending since the pandemic.
Goldman Sachs' Chief Financial Officer stated on Tuesday Eastern Time that the Fed's 50 basis point rate cut has truly put the U.S. economy on the path to a &#34;soft landing.&#34; Chief Financial Officer Denis Coleman said, &#34;I believe the 50 basis point rate cut is a clear signal of a new direction.&#34;
&#34;Hopefully, this will release more and more confidence, significantly reduce the cost of capital - and perhaps take some more strategic measures by the end of this year.&#34; &#34;Managing the economy during the transition has always been a very tricky task. But with inflation falling, unemployment at a manageable level, the Fed starting to cut interest rates, and to some extent maintaining a soft landing trajectory.&#34;
Federal Reserve officials have recently stated that, given that concerns about inflation have largely dissipated, they are now more focused on the labor market aspect of their dual mandate. Federal Reserve Chairman Powell has repeatedly stated that Fed officials are not seeking or welcoming further cooling of the labor market conditions. Powell and other Fed officials have hinted in various ways recently that the Fed's main task in the future is to avoid an economic recession and ensure a &#34;soft landing&#34; for the U.S. economy

The US economy has shown strong performance since the outbreak of the pandemic, with an average annual GDP growth of 5.5% from the second quarter of 2020 to 2023. Consumer spending is driving economic recovery, and it is expected that the Fed's interest rate cuts will help achieve a "soft landing". Revised data shows that economic growth is $294.2 billion higher than previously reported, mainly due to an increase in consumer spending. Consumer spending is expected to significantly increase in 2022 and 2023, boosting confidence in stable economic growth

- The revised U.S. government statistics indicate a stronger-than-expected economic rebound from the COVID-19 recession, primarily driven by increased consumer spending in 2022 and 2023.  
- The average inflation-adjusted GDP growth rate from Q2 2020 to the end of 2023 is now reported at 5.5%, up from 5.1%, reflecting robust consumer expenditure and business investments.  
- As the Federal Reserve initiates a rate cut cycle, many institutions, including Goldman Sachs, believe the U.S. economy is nearing a "soft landing," despite some downward revisions in GDP growth for Q3 and Q4 2023.

Zhitong

The truth that subverts cognition: Since the epidemic, the US economy has been incredibly strong! With a background of interest rate cuts, is a "soft landing" imminent?