The US economy accelerated last quarter at a strong 2.8 percent annual pace, with consumers and businesses helping drive growth despite the pressure of continually high interest rates.
Yesterday’s report from the US Department of Commerce said the GDP picked up in the April-to-June quarter after growing at a 1.4 percent pace in the January-to-March period. Economists had expected a weaker 1.9 percent annual pace of growth.
The GDP report also showed that inflation continues to ease, while still remaining above the US Federal Reserve’s 2 percent target. The central bank’s favored inflation gauge rose at a 2.6 percent annual rate last quarter, down from 3.4 percent in the first quarter of the year.
Photo: Saul Loeb, AFP
Excluding volatile food and energy prices, so-called core PCE inflation increased at a 2.9 percent pace. That was down from 3.7 percent from January through March.
The latest figures should reinforce confidence that the US economy is on the verge of achieving a rare “soft landing,” whereby high interest rates, engineered by the Fed, tame inflation without tipping the economy into a recession.
Helping boost last quarter’s expansion was consumer spending, the heart of the US economy. It rose at a 2.3 percent annual rate in the April-to-June quarter, up from a 1.5 percent pace in the January-to-March period. Spending on goods, such as cars and appliances, increased at a 2.5 percent rate after falling at a 2.3 percent pace in the first three months of the year.
Business investment was up last quarter, led by a 11.6 percent 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-to-June period’s growth.
Fed officials have made clear that with inflation edging toward their 2 percent target level, they’re prepared to start cutting interest rates soon, something they’re widely expected to do in September.
“The Fed will be reassured’’ by Thursday’s GDP report, Comerica Bank chief economist Bill Adams said. “With inflation trending lower ... the Fed thinks that it’s getting close to the time to cut interest rates.’’
The state of the economy has seized Americans’ attention as the presidential campaign has intensified. Though inflation has slowed sharply, to 3 percent from 9.1 percent in 2022, prices remain well above their pre-pandemic levels.
US President Joe Biden hailed robust US growth figures yesterday as proof the country had the world’s “strongest economy,” but said he had “more to do” in his last six months in the White House.
Biden, who endorsed Vice President Kamala Harris after his historic decision to drop out of this year’s election, added in a statement: “The Vice President and I will keep fighting for America’s future.”
Additional reporting by AFP
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