The nation's economy accelerated last quarter at a strong 2.8% annual pace, with consumers and businesses helping drive growth despite the pressure of continually high interest rates, reports the AP. Thursday's report from the Commerce Department said the gross domestic product—the economy's total output of goods and services—picked up in the April-June quarter after growing at a 1.4% pace in the January-March period. Economists had expected a weaker 1.9% annual pace. Helping boost last quarter's expansion was consumer spending, which rose at a 2.3% annual rate in the April-June quarter, up from a 1.5% pace in the January-March period. Spending on goods, such as cars and appliances, increased at a 2.5% rate after falling at a 2.3% pace in the first three months of the year.
Business investment was up last quarter, led by a 11.6% annual increase in equipment investment. Growth also picked up because businesses increased their inventories. On the other hand, a surge in imports, which are subtracted from GDP, shaved about 0.9 percentage point from the April-June growth. Despite last quarter's uptick, the US economy has cooled in the face of the highest borrowing rates in decades, engineered by the Federal Reserve to fight high inflation.
Fed officials have made clear that with inflation edging toward their 2% target level, they're prepared to start cutting interest rates, something they're widely expected to do in September. "This is a perfect report for the Fed," Olu Sonola, head of economic research at Fitch Ratings, said of Thursday's GDP numbers. "Growth during the first half of the year is not too hot, inflation continues to cool, and the elusive soft landing scenario looks within reach." Though inflation has slowed sharply, to 3% from 9.1% in 2022, prices remain well above their pre-pandemic levels.
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