The US economy has shown notable acceleration compared to Q1, once again defying the expectations of those predicting a downturn.

The latest GDP report reveals that private consumption significantly contributed to this growth, accounting for 55% of the increase in Q2.

This marks one of the strongest quarters for private consumption since Q2-2022. While net exports were the weakest component, this does not present a major concern for the overall economic outlook.

Regarding PCE prices, to match the quarter-over-quarter core deflator, the PCE Core Index would need to reach a value of 122.50175 in June.

This would require a month-over-month core print of 0.37% in the Core PCE, which is unlikely. Consequently, an upward revision of more than 15 basis points for the quarter is expected. It is rather amusing that several journalists are calling the upcoming PCE number a nail-biter when the PCE deflator, released yesterday, already signals an upside “surprise.”

In light of these observations, it is difficult to interpret this data as dovish in any way. The current economic indicators suggest a more robust and resilient economy than some had anticipated.

Chart 1a: US GDP decomposition.. trending up!