The U.S. economy grew at a robust annual rate of 3% in the last quarter, according to a revised estimate released by the Commerce Department on Thursday. This adjustment marks an increase from the initially reported 2.8% growth rate for the April-June period, reflecting stronger-than-expected consumer spending and business investment.
The upward revision highlights a significant acceleration from the 1.4% growth rate recorded in the first quarter of 2024. Consumer spending, which constitutes approximately 70% of U.S. economic activity, rose at a 2.9% annual rate, up from the previously estimated 2.3%. Business investment expanded by 7.5%, driven by a notable 10.8% increase in equipment investments.
Despite enduring high interest rates, the economy has shown resilience. This performance comes as voters prepare for the November presidential election amidst ongoing concerns about high prices, even though inflation has decreased substantially since its peak in mid-2022. Recent consumer confidence surveys from the Conference Board and the University of Michigan indicate a positive shift in economic sentiment.
“The GDP revisions show the U.S. economy was in good shape in mid-2024,” noted Bill Adams, chief economist at Comerica Bank. “Solid growth of consumer spending propelled the economy forward in the second quarter, and the increase in consumer confidence suggests continued growth into the latter half of the year.”
The revised GDP estimate also revealed easing inflation. The personal consumption expenditures (PCE) index, the Federal Reserve’s preferred inflation gauge, rose at a 2.5% annual rate, down from 3.4% in the previous quarter. Core PCE inflation, excluding food and energy prices, grew at a 2.7% pace, down from 3.2%.
Following a series of interest rate hikes aimed at curbing inflation, the Fed may soon consider rate cuts to support the job market and maintain economic stability. With inflation nearing the Fed’s 2% target and the labor market showing signs of softness, the central bank is poised for a policy shift that could foster a “soft landing” for the economy. The final estimate of GDP growth for the second quarter will be released next month.
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