In the second quarter, the U.S. economy grew by more than expected amid solid gains in business investment and consumer spending, although inflation pressures decreased, leaving expectations intact of an interest rate cut by the Federal Reserve in September.
On Thursday, the Commerce Department’s advance report on second-quarter GDP showed last quarter’s growth was also boosted by inventory building as well as higher government spending. The housing market recovery, however, slowed down and dragged on the economy slightly. The trade deficit also widened again, subtracting from growth in GDP.
Thanks to a resilient labor market, the US economy is still outperforming its global peers, despite hefty rate hikes from the U.S. Federal Reserve in 2022 and 2023.
Analysis at the Commerce Department’s Bureau of Economics said in its advance estimate of second-quarter gross domestic product that GDP last quarter increased at an annualized rate of 2.8%.
Economists had expected GDP would rise at a rate of 2.0%. Forecasts ranged from a 3.4% pace to a 1.1% rate. In the first quarter, the economy grew at a rate of 1.4%.
Officials at the U.S. central bank see a 1.8% rate as the non-inflationary growth pace. Growth was slower than the 4.2% rate recorded in the second half of 2023.
