Nothing has changed in the government’s assessment of the U.S. economy.
The government said Thursday the U.S. economy grew at a 2.1% annual pace from April through June, a continued steady performance despite higher interest rates.
The second-quarter expansion of the nation’s gross domestic product — its total output of goods and services — marked a modest deceleration from the economy’s 2.2% annual growth from January through March, the Associated Press reported.
Consumer spending, business investment and state and local government outlays drove the second-quarter economic expansion.
The economic performance comes despite the Federal Reserve dramatically raising interest rates to combat inflation, which last year hit a four-decade high. The Fed has raised its benchmark rate 11 times since mid-March 2022. Consumer spending rose at an annual rate of just 0.8% from April through June, down from the government’s previous estimate of 1.7% and the weakest figure since the first quarter of 2022, the AP reported.
But business investment excluding housing, a closely watched barometer, rose at a 7.4% annual pace, the fastest rate in more than a year. And state and local government spending and investment jumped 4.7%, the biggest such quarterly gain since 2019.
Many think growth is accelerating in the current July-September quarter, fueled by still-free-spending consumers. Many Americans, for example, flocked to theaters for the hit summer movies “Barbie” and “Oppenheimer” and splurged on Taylor Swift and Beyonce tickets. Business investment is also thought to have remained solid, according to the AP report.
The economy is expected to weaken in the final three months of the year. Hiring and income growth are slowing. And economists think the savings that many Americans amassed during the pandemic from federal stimulus checks will have evaporated by next quarter.
The economy also faces an array of obstacles that are expected to hobble growth. They include surging oil prices, the resumption of student loan payments, the effects of the United Auto Workers strike, the loss of pandemic-era child care aid and a likely government shutdown beginning this weekend.
The combined effects of those factors will hamper Americans’ ability to spend and likely weaken the economy.