The Commerce Department initially reported the U.S. economy grew at a healthy rate in the second quarter, and saw no reason to change its mind when it consider a revision.
The American economy grew at a 3% annual pace from April through June, with strong consumer spending and business investment leading the way, Commerce officials said Thursday in leaving its previous estimate unchanged.
According to the department, the nation’s gross domestic product — the nation’s total output of goods and services — picked up sharply in the second quarter from a lukewarm 1.6% annual rate in the first three months of the year.
Consumer spending grew last quarter at a 2.8% pace, down a bit from the 2.9% rate the government had previously estimated. Business investment was also solid: It increased at a vigorous 8.3% annual pace last quarter, led by a 9.8% rise in investment in equipment.
According to an Associated Press report, the final GDP estimate for the April-June quarter included figures showing that inflation continues to ease, to just above the Federal Reserve’s 2% target.
The central bank’s favored inflation gauge — the personal consumption expenditures index, or PCE — rose at a 2.5% annual rate last quarter, down from 3.4% in the first quarter of the year, the AP reported. Excluding volatile food and energy prices, so-called core PCE inflation grew at a 2.8% pace, down from 3.7% from January through March.
Last week, with inflation dropping steadily to about 2.5%, the Fed cut its benchmark interest rate by an unusually large half-point. The rate cut, the Fed’s first in more than four years, reflected its new focus on shoring up the job market now that inflation has largely been tamed.
“The economy is in pretty good shape,’’ Bill Adams, chief economist at Comerica Bank, wrote in a commentary. “After a big rate cut in September and considerable further cuts expected by early 2025, interest-rate-sensitive sectors like housing, manufacturing, auto sales, and retailing of other big-ticket consumer goods should pick up over the next year. Lower rates will fuel a recovery of job growth and likely stabilize the unemployment rate around its current level in 2025.’’
