U.S. Economy Surprisingly Rises to 3% Growth in Q2, Government Reports

The U.S. economy grew at a 3% annual rate last quarter, up from an earlier estimate of 2.8%. Strong consumer spending and business investment drove this growth.

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The U.S. economy grew by 3% last quarter. This is better than earlier predictions. The Commerce Department shared this news on Thursday, showing a brighter picture of economic health.

Initially, experts thought the economy grew at a rate of 2.8% from April to June. But this new figure shows a significant improvement. 

The second-quarter growth also marked a big jump from the 1.4% growth seen in the first three months of 2024.

Key Drivers Behind the Growth

One of the biggest factors driving this growth was strong consumer spending. You spent more, which helped boost the economy. 

Consumer spending, which makes up about 70% of U.S. economic activity, increased at a 2.9% annual rate. This is higher than the 2.3% rate previously estimated.

Business investment also played a major role. Investments grew at a 7.5% rate, with a notable 10.8% increase in equipment investment. This shows that businesses are putting more money into their future, which is a positive sign for the economy.

Despite ongoing high interest rates, the economy has stayed strong. Many Americans are still feeling the pinch from high prices, even though inflation has dropped from its peak in mid-2022. 

However, recent reports show that consumer confidence is rising. People are feeling better about the economy, which should keep supporting growth.

“The GDP revisions show the U.S. economy was in good shape in mid-2024,” said Bill Adams, chief economist at Comerica Bank. “Strong consumer spending and rising confidence suggest that growth will continue in the second half of the year.”

Inflation Eases but Remains a Concern

The latest report also shows that inflation is easing but still above the Federal Reserve’s 2% target. The personal consumption expenditures index, or PCE, which measures inflation, rose at a 2.5% annual rate last quarter. 

This is down from 3.4% in the first quarter of the year. Core PCE inflation, which excludes food and energy prices, increased at a 2.7% pace, compared to 3.2% earlier in the year.

The Federal Reserve had raised interest rates 11 times over the past two years to fight high inflation. This move helped bring inflation down from a peak of 9.1% to 2.9% as of last month. 

The high rates were expected to slow down the economy and possibly lead to a recession. But the economy has kept growing, and job creation has remained strong.

With inflation close to the Fed’s target, Chair Jerome Powell is expected to cut interest rates soon. This could help boost the economy further, making loans for cars, homes, and other purchases cheaper.

Looking Ahead

The Federal Reserve’s main concern now is supporting the job market, which has shown some signs of weakening. The unemployment rate has been rising and currently stands at 4.3%. Job openings and hiring have also slowed down but remain steady.

The latest GDP report is the Commerce Department’s second estimate for the April-June quarter. The final estimate will be released next month.