The U.S. economy performed better than even the Commerce Department thought in the second quarter.
The economy grew last quarter at a 3% annual pace, fueled by strong consumer spending and business investment, the government said Thursday, upgrading its initial assessment.
The Commerce Department had previously estimated the nation’s gross domestic product — the total output of goods and services — expanded at a 2.8% rate from April through June, The Associated Press reported.
The second-quarter growth was up markedly from the sluggish 1.4% growth rate in the first three months of 2024.
Consumer spending, which accounts for about 70% of U.S. economic activity, rose at a 2.9% annual rate last quarter, up from 2.3% in the government’s initial estimate. Business investment expanded at a 7.5% rate, led by a 10.8% jump in investment in equipment, the AP reported.
“The GDP revisions show the U.S. economy was in good shape in mid-2024,’’ Bill Adams, chief economist at Comerica Bank, told the AP. “Solid growth of consumer spending propelled the economy forward in the second quarter, and the increase of consumer confidence in July suggests it will propel growth in the second half of the year as well.’’
The latest GDP estimate for the April-June quarter included figures that showed that inflation continues to ease while remaining just above the Federal Reserve’s 2% target. The central bank’s favored inflation gauge — the personal consumption expenditures index, or PCE — rose at a 2.5% annual rate last quarter, down from 3.4% in the first quarter of the year. And excluding volatile food and energy prices, so-called core PCE inflation grew at a 2.7% pace, down from 3.2% from January through March.
To fight spiking prices, the Fed raised its benchmark interest rate 11 times in 2022 and 2023, lifting it to a 23-year high and helping shrink annual inflation from a peak of 9.1% to 2.9% as of last month.
With inflation only slightly above the Fed’s 2% target level and likely slowing further, Chair Jerome Powell has essentially declared victory over inflation. As a result, the Fed is poised to start cutting its benchmark interest rate when it next meets in mid-September.
Thursday’s report was the Commerce Department’s second estimate of GDP growth in the April-June quarter. It will issue its final estimate late next month.
