U.S. Economy Grows at 3% Annual Pace in Q2

The U.S. economy expanded at a robust 3% annual rate in the second quarter of 2024, according to revised data from the Commerce Department. This marks an upgrade from the previously estimated 2.8% growth rate and reflects stronger-than-expected consumer spending and business investment. The growth represents a significant acceleration from the 1.4% rate recorded in the first quarter.

Consumer spending, which drives approximately 70% of U.S. economic activity, rose at a 2.9% annual rate last quarter, up from the initial estimate of 2.3%. Business investment also surged, expanding at a 7.5% rate, with equipment investment leading the way with a 10.8% increase.

The report highlights the resilience of the U.S. economy, which has continued to grow despite the pressures of high interest rates. This economic strength is becoming a critical factor in the upcoming November presidential election, as many Americans grapple with the lingering effects of inflation, even though it has significantly declined from its peak in mid-2022.

Inflation, as measured by the Federal Reserve’s preferred gauge, the personal consumption expenditures (PCE) index, eased to a 2.5% annual rate last quarter, down from 3.4% in the first quarter. Core PCE inflation, excluding food and energy prices, also declined to 2.7% from 3.2%. These figures suggest that inflation is moving closer to the Fed’s 2% target.

With inflation showing signs of further easing, the Federal Reserve is now shifting its focus towards supporting the job market, which has shown signs of weakening. The unemployment rate has risen to 4.3%, and both job openings and hiring have slowed, though they remain at solid levels.

Fed Chair Jerome Powell has signaled that the central bank may soon begin lowering its benchmark interest rate, aiming for a “soft landing” that balances inflation control with economic growth and job market stability. The Fed is expected to consider rate cuts in its upcoming meeting in mid-September, which could lead to lower borrowing costs for consumers and businesses.

The Commerce Department will issue its final estimate of GDP growth for the April-June quarter next month.