The U.S. economy experienced a healthy acceleration last quarter, growing at an annual pace of 2.8%, with consumers and businesses contributing to this growth despite enduring high interest rates.
The Commerce Department’s report revealed that the GDP surged in the April-June quarter after a 1.4% growth rate in the January-March period, surpassing economists’ expectations of a 1.9% growth rate.
The big picture: Inflation showed signs of moderation but remained above the Federal Reserve’s 2% target, with the central bank’s preferred inflation gauge decreasing to a 2.6% annual rate from 3.4% in the first quarter.
- The U.S. economy’s progress is nearing a potential “soft landing”, where the Federal Reserve’s high-interest-rate strategy aims to curb inflation without causing a recession.
- Consumer spending, a key driver of the economy, increased by a 2.3% annual rate in the last quarter, with businesses also boosting growth through investments in equipment and inventories.
Driving the news: A surge in imports, which subtract from GDP, had a negative impact on growth, offsetting some of the expansion seen in the April-June period.
- The Fed is inclined to cut interest rates in response to easing inflation, with a rate reduction expected in September to lower borrowing costs for consumers.
- The U.S. economy managed to withstand challenges such as supply shortages, inflation, and geopolitical tensions, with consumer spending and resilient job markets helping to sustain economic growth.
