The US economy is showing signs of recovery from the pandemic-induced recession, as some key economic indicators point to growth and resilience. However, the data also reveal some challenges and risks that could hamper the recovery in the coming months.
According to the latest report from the Bureau of Economic Analysis, the US gross domestic product (GDP) grew at an annualized rate of 2.1% in the second quarter of 2023, slightly lower than the previous estimate of 2.2%1. The growth was driven by strong consumer spending, which increased by 0.8% in June2, as well as by government spending and net exports. However, business investment and residential construction declined, reflecting supply chain disruptions and labor shortages.
The labor market also showed improvement, as the unemployment rate remained unchanged at 3.8% in September3, the lowest level since March 2020. The economy added 336,000 nonfarm payroll jobs in September3, beating market expectations and indicating a rebound from the Delta variant surge. However, the labor force participation rate stayed at 62.8%3, well below the pre-pandemic level of 63.4%, suggesting that many workers are still out of the labor force due to health concerns, childcare issues, or early retirement.
The inflation rate also eased slightly, as the consumer price index (CPI) rose by 0.4% in September, down from 0.6% in August4. The annual inflation rate was 3.7% in September, unchanged from August and below the peak of 4.1% in June4. The moderation in inflation was mainly due to lower energy prices and a slowdown in the prices of used cars and trucks. However, inflation pressures remain elevated, as supply bottlenecks and strong demand continue to push up the prices of many goods and services.
The Conference Board Leading Economic Index (LEI), a composite of ten indicators that measure future economic activity, increased by 0.5% in September to 118.55, following a 0.9% increase in August and a 0.5% increase in July. The LEI suggests that the US economy will continue to grow at a moderate pace in the near term, supported by improving consumer confidence, rising stock prices, and favorable credit conditions. However, the LEI also warns of some downside risks, such as rising COVID-19 cases, slowing global growth, and policy uncertainty.
Overall, the US economy is recovering from the pandemic shock, but faces some headwinds that could affect its growth trajectory. The Federal Reserve is expected to start tapering its bond-buying program soon, as it sees progress on its inflation and employment goals. The fiscal policy outlook is also uncertain, as Congress debates over the infrastructure and social spending bills that could have significant implications for the economy. The US economic indicators will be closely watched by investors and policymakers for any signs of strength or weakness in the coming months.