New York: According to a CNN report, the US economy exhibited stronger growth than expected in the second quarter. The Commerce Department reported that the Gross Domestic Product (GDP), the broadest measure of economic output, grew at an annualized, seasonally adjusted rate of 2.4% from April to June.
This growth rate was faster than the previous three months and surpassed economists’ predictions, who had expected a 1.8% rate, according to Refinitiv. The GDP figures are adjusted for inflation, as mentioned in the CNN report.
The second-quarter economic expansion was primarily driven by business investment, government purchases, inventory investment, and consumer spending, although the pace of consumer spending was significantly weaker compared to the first quarter.
Consumer spending, which accounts for approximately two-thirds of economic output, increased at a rate of just 1.6% in the second quarter, marking a sharp decline from the 4.2% rate observed in the first three months of the year. The decrease in consumer spending was particularly evident in durable goods purchases, which include products like cars and washing machines meant to last at least three years.
On the other hand, nonresidential business investment experienced a substantial increase, growing at a rate of 7.7% in the second quarter, compared to a mere 0.6% rate at the beginning of the year. This growth was largely driven by higher spending on equipment, which saw a remarkable rise from -8.9% to 10.8%.
The slowdown in consumer spending can be attributed to cooling demand, which the central bank has been trying to achieve through rate hikes. However, the report also suggests that the economy is demonstrating resilience, potentially giving the Federal Reserve enough room to implement another rate hike later in the year, as highlighted by CNN.