The US economy grew at an annual rate of 2.1% between April and June, extending its strong performance in the face of higher interest rates, the US government reported Thursday, abandoning the previous estimate of unchanged.
The expansion of the country’s second-quarter gross domestic product — the total output of goods and services — marked a modest slowdown from the 2.2% annual economic growth from January to March.
Consumer spending, business investment and state and municipal government spending fueled economic expansion in the second quarter.
The economy and labor market have shown surprising resilience despite the Federal Reserve raising interest rates sharply to combat inflation, which hit a four-decade high last year. The Fed has raised its benchmark rate 11 times since March 2022, raising concerns that even higher borrowing rates could trigger a recession.
For now, however, inflation has slowed without causing much damage to the economy, raising hopes that the central bank will achieve a so-called soft landing: slowing the economy enough to overcome high inflation without cause a painful recession.
However, those higher rates hurt. Consumer spending, for example, rose at an annual rate of just 0.8% from April to June, well below the government’s previous estimate of 1.7% and the weakest figure since the first quarter of 2022. .
But business investment excluding housing, a closely watched barometer, rose at an annual rate of 7.4%, the fastest rate in more than a year. And state and municipal government spending and investment rose 4.7%, the largest quarterly increase of its kind since 2019.