GDP growth accelerated in Q2

Economy posts near one-year high expansion: The economy kept its foot on the gas in the second quarter, expanding 3.7% year on year compared to 3.2% in the first quarter. Q2’s reading marked the best result since Q3 2023.

Fixed investment and exports fuel acceleration: Domestically, the upturn was chiefly underpinned by a faster increase in fixed investment, which clocked 5.8% year on year in Q2, above Q1’s 2.7% expansion. Less positively, household spending growth slowed to 5.5% in Q2 (Q1: +6.4% yoy). Moreover, public consumption contracted at a quicker rate of 4.6% in Q2 (Q1: -1.9% yoy). On the external front, exports of goods and services bounced back, growing 4.9% in Q2 (Q1: -3.5% yoy). Conversely, growth in imports of goods and services moderated to 10.0% in Q2 (Q1: +13.7% yoy). As a result, net trade contributed positively to economic growth.

Stable growth ahead, though risks are tilted to the upside: Our panelists expect economic growth to average around Q2 levels in H2, as slower private spending growth largely offsets a recovery in public spending plus faster expansions in fixed investment and exports of goods and services. That said, available data hints at upside risk to this projection, as slower price pressures and stronger growth in remittances inflows in Q3 likely supported household budgets at the outset of H2. Our Consensus is for the economy to expand at a similar clip to 2023 in both 2024 and 2025. Faster-than-expected growth in the U.S.—a key source of remittances—is an upside risk.

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