Gross domestic product rose at a 2.8 percent annual rate in the second quarter, new evidence of the economy’s resilience despite high interest rates.
Economic growth picked up more than expected in the spring, as cooling inflation and a strong labor market allowed consumers to keep spending even as high interest rates weighed on their finances.
Gross domestic product, adjusted for inflation, increased at a 2.8 percent annual rate in the second quarter, the Commerce Department said on Thursday. That was faster than the 1.4 percent rate recorded in the first quarter, but shy of the unexpectedly strong growth in the second half of last year.
Consumer spending, the backbone of the U.S. economy, rose at a 2.3 percent annual rate in the second quarter — a solid pace, albeit much slower than in 2021, when businesses were reopening after pandemic-induced closings. Business investment in equipment rose at its fastest pace in more than two years. Inflation, which picked up unexpectedly at the start of the year, eased in the quarter.
The data is preliminary and will be revised at least twice.
Taken together, the findings suggest that the economy remains on track for a rare “soft landing,” in which inflation eases without triggering a recession. That is something few forecasters considered likely when the Federal Reserve began raising interest rates two years ago to combat inflation.
“It’s the perfect landing,” said Sam Coffin, an economist at Morgan Stanley.
Recession fears re-emerged in recent months, first when inflation briefly surged and then when the previously rock-solid job market showed signs of cracking in the spring. But recent data, including the surprisingly strong second-quarter growth figures, indicate that the expansion is on firm footing.
“The economy is in a transition, but it’s in a good place,” said Ryan Sweet, chief U.S. economist at Oxford Economics. “The economy is slowing from very strong growth in the second half of last year. We’re just settling down into something that’s a little more sustainable.”
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Quarterly change in real gross domestic product, by category
Consumer spending
Business investment
Government spending
+20%
+10
0
–10
’21
’22
’23
’24
’23
’21
’22
’23
’24
’21
’22
’24
Housing
Imports
Exports
+20%
+10
0
–10
–20
’23
’21
’22
’24
’23
’23
’21
’22
’24
’21
’22
’24
Quarterly change in real gross domestic product,
by category
Consumer spending
Housing
+20%
+10
0
–10
–20
’23
’21
’22
’23
’24
’21
’22
’24
Business investment
Government spending
+20%
+10
0
–10
’21
’22
’23
’24
’21
’22
’23
’24
Imports
Exports
+20%
+10
0
–10
–20
’21
’22
’23
’24
’21
’22
’23
’24
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Source: Economy - nytimes.com
