The U.S. economy grew at an annualized rate of 2.8 percent in the second quarter, well above the 2 percent forecast by Wall Street analysts.
The stronger-than-expected growth indicates the economy is continuing to expand despite high interest rates, raising questions about the need for the Federal Reserve to cut interest rates in the near future.
After booming in the second half of 2023, growth slowed to 1.4% in the first quarter of this year.
Consumer spending, the main driver of economic growth, rose 2.3%, beating expectations, according to data released by the Commerce Department on Thursday. The increase was driven mostly by spending on durable goods, a sign that consumers remain willing to buy big-ticket items like cars and appliances despite high interest rates. Spending on services also accelerated.
Fixed investment by businesses rose sharply to 3.6%, the fastest pace in nearly a year, while business investment growth was the strongest since 2022.
Government spending increased 3.1% due to increased defense spending.
Final sales to domestic private buyers, a key indicator of private sector growth drivers, grew by a strong 2.6 percent for the second consecutive quarter, indicating that demand remains robust and has not weakened since the start of the year. The indicator grew at a 3.6 percent pace in the first quarter of 2023, 1.7 percent in the second quarter, 3 percent in the third quarter and 3.3 percent in the fourth quarter.
Inflation slowed, but not as much as expected: Core personal consumption expenditures inflation fell to 2.9% in the second quarter, down from 3.7% in the first quarter. Economists had expected a decline to 2.7%.
