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WASHINGTON (AP) — The U.S. economy accelerated at a solid 2.8% annual rate last quarter, as consumers and businesses helped drive growth despite pressure from higher interest rates.
A report from the Commerce Department on Thursday showed gross domestic product, or the total output of goods and services in an economy, increased in the April-June quarter after growing 1.4% in 2017’s January-March period. Growth also accelerated last quarter as companies built up inventories. Economists had expected growth of 1.9%.
Despite last quarter’s rebound, the world’s largest economy has cooled in the face of the highest interest rates in decades set by the Federal Reserve to fight inflation. Annualized GDP growth peaked at 2% for six consecutive quarters from mid-2022 to 2023. In the last two quarters of last year, GDP grew strongly by 4.9% and 3.4%, respectively.
As the presidential campaign heats up, the state of the economy has captured the attention of Americans. Although inflation has slowed significantly, from 9.1% to 3% in 2022, prices remain well above pre-coronavirus pandemic levels.
This year’s slowdown largely reflects sharp increases in interest rates on mortgages and auto loans, credit cards and many business loans, the result of a series of aggressive rate hikes by the Federal Reserve.
The Fed’s rate hikes, 11 of them in 2022 and 2023, are in response to a surge in inflation that began in the spring of 2021 as the economy unexpectedly recovered quickly from the recession caused by the COVID-19 pandemic. There are severe shortages. Russia’s invasion of Ukraine in February 2022 has added insult to injury, leading to higher prices for energy and grains that the world depends on. Prices are rising both domestically and worldwide.
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