The U.S. economy accelerated in the second quarter as consumers increased their spending, businesses invested more in equipment and stocked inventories, and inflation cooled.
The growth rate of the US economy picked up speed in the last quarter, showing unexpected resilience despite high interest rates and ongoing inflation.
According to the commerce department’s report on Thursday, the gross domestic product (GDP) – a key indicator of economic health – increased by 2.8% in the three months leading up to June. This figure surpassed economists’ predictions and marked a significant rise from the 1.4% growth observed in the first quarter.
This development comes at a time when the presidential election campaign is intensifying, putting the US economy under close scrutiny.
While Joe Biden hailed the “strongest economy in the world” as he announced his withdrawal from the race on Sunday, Donald Trump – who is campaigning to succeed him – has criticized Biden for allegedly weakening the economy.
A Harris poll conducted for the Guardian in May found that nearly three in five Americans incorrectly believe the US is in a recession, with the majority blaming the Biden administration.
In response to the highest inflation levels in a generation, policymakers at the Federal Reserve have raised interest rates to a two-decade high in an effort to curb inflation. They are now contemplating when to start lowering rates, as early signs indicate that price growth is moving closer to the Fed’s 2% target.
Olu Sonola, head of economic research at Fitch Ratings, commented on the GDP figures from Thursday, saying, “This is a perfect report for the Fed. Growth during the first half of the year is not too hot, inflation continues to cool, and the elusive soft landing scenario looks within reach.”
Economists had anticipated a GDP growth of about 2% for the second quarter. However, some are concerned about the US economy’s performance later this year as the impact of high interest rates becomes more pronounced.
Economists at Pantheon Macroeconomics informed clients earlier this week, “We expect a slowdown from here, driven by the mounting pressure from high interest rates, which likely are only now starting to exert their full impact on the real economy, given the long lags involved.”