The U.S. economy grew at a 2.8% annualized rate in the second quarter—a faster rate than economists expected as consumer spending increased and businesses built up inventories, the Commerce Department said on Thursday.
Why it matters:
The new data raises confidence the economy has achieved a “soft landing” — healthy economic growth alongside cooling inflation.
- Economists expected an annualized growth rate of 1.9% last quarter. The economy grew at a 1.4% rate in the first three months of the year.
Driving the news:
The accelerated growth stemmed from a jump in inventory investment and consumer spending.
- Companies also increased spending on equipment and intellectual property. That was partly offset by a slump in housing, the government said.
- Personal consumption expenditures rose at a 2.3% annualized rate last quarter, up from the 1.4% in the first quarter.
- Consumer spending contributed 1.6% to the rise in GDP, while private inventories added 0.82 percentage point.
The big picture:
Gloomy forecasts of a recession over the past year have not come to pass.
- The Federal Reserve raised interest rates to the highest in two-decades to restrain growth and bring down inflation—raising expectations those actions would tip the economy into a sharp slowdown.
- Fed officials have cautiously suggested the economy has achieved a soft landing as inflation dissipates.
- The central bank is expected to keep rates on hold at the policy meeting next week and set the table for a rate cut in September.
The bottom line:
The economy continues to defy expectations of a slowdown.
HENRY KOTULA 