US economy picks up steam despite expectations of slowdown

The US economy defied expectations to see growth pick up in the second quarter, according to government data released on Thursday $($Jul $27),$ supported by business investment and resilient consumer spending. GDP growth in the world's biggest economy came in at an annual rate of $2\mathrm{.}4$ per cent for the April to June period, said the US Commerce Department, despite analyst expectations of a slower rate.

The rise in GDP "reflected increases in consumer spending, nonresidential fixed investment, state and local government spending" and other areas, said the Commerce Department in a statement on Thursday.

Some analysts think the United States could see a mild recession in the second half of the year but this likelihood appears to be diminishing on data pointing to a strong labour market and low unemployment $-$ while inflation eases. "Growth is outpacing expectations even as the monetary policy stance has become restrictive," said Rubeela Farooqi, chief US economist at High Frequency Economics.

"A strong household sector that continues to benefit from positive job growth and rising real incomes should keep growth on a positive trajectory this year," she added. As inflation cools, "real wage growth is turning positive", providing a tailwind to consumer spending, said Gregory Daco, chief economist at EY$-$Parthenon, in a note this week.

Source: Adapted and edited from CNA, $27$ Jul $2023$

i$.$ Explain the phase of the business cycle for US for $2023.$

ii$.$ Using the GDP expenditure approach, explain the various components contributing to US GDP growth of $2\mathrm{.}4\%.$

iii. Discuss two reasons why US GDP growth of $2\mathrm{.}4\%$ may not reflect accurately the improvement in standard of living of an average US citizen, and discuss one alternative measure that is NOT related to the country$$s production to assess the standard of living for US citizens.