Signaling the end of this phase of the real estate cycle and building upon our belief of real estate values bottoming, the second quarter saw core indicators improving previous positions. Most notably the Leading Economic Index (LEI), a composite index comprised of ten components such as the rate spread between 10-year Treasury bonds and the Federal Funds rate, S&P 500 and average weekly initial claims for unemployment, suggests we're moving into the recovery phase of the cycle as June saw its smallest month over month contraction of 0.2%. Evidenced further by the first half of 2024 experiencing a smaller decline of 1.9% than the 2.9% felt in the second half of last year.
Additionally pointing to the end of this recessionary period, inflation and labor continue to cool albeit at rates less than experienced in 2024 or the negative peaks of 2023. Coupled with the U.S. economy remaining resilient outpacing expectations as the GDP rose at annual rate of 2.8%, a sharp increase from the 1.4% rate in the first quarter. The former provides the Federal Reserve ample runway to cut rates at their September meeting. While the latter, driven in large
part by consumer spending as core retail sales surge by 0.9% month over month, suggests a soft landing easing the fears of a lingering recession.
Fortifying our confidence in asset values bottoming, Green Street's index of private real estate values has had six consecutive months of flat or increasing values for the first time since 2022. Despite the growing likelihood of the Fed cutting rates in the near term, capital markets have proved agile responding to the higher rate environment finding ways to navigate challenging maturities and deploying additional capital. Market activity has ticked up and a vast majority of the commercial real estate loans maturing in 2024 have not hit the market highlighting the agility from both borrower and lender taking necessary steps recapitalizing funds freeing up capital and avoiding future loses. Property fundamentals remain strong overall, fueling positive year-to-date returns posted by the retail and multifamily sectors. These market pillars mark a shift in sentiment growing confidence in values improving in the second half of 2024.
Propelled by favorable supply and demand dynamics, retail remains in a unique and favorable position. New development starts are almost non-existent, hovering near ten-year lows. Market rents grew 0.3% quarter over quarter and are largely expected to climb higher in the upcoming third and fourth quarters. Placer.ai reported retail visits improved year over year, rising to 4.2% in the second quarter. According to JLL back to School Shopping Survey, parents in every major income bracket plan to spend 21.8% more on school supplies in the third quarter and nearly 90% will interact with a brick-and-mortar location. Reflected in the structural trends cited above, retail is well-positioned to benefit and capture additional value in both the near and long term.