The U.S. economy grew faster than expected in the second quarter, expanding at a 3% annual rate, according to updated data from the Commerce Department. This is a slight increase from the earlier estimate of 2.8%, largely due to stronger consumer spending and higher business investment.
Consumer spending, which makes up about 70% of the economy, rose at an annual rate of 2.9%—up from the earlier estimate of 2.3%, as reported by the Associated Press. Business investment also picked up, growing by 7.5%, driven by a notable 10.8% jump in spending on equipment.
The economy's second-quarter performance represents a significant improvement from the slow 1.4% growth seen in the first quarter of 2024. Despite concerns about high-interest rates, recent data suggests that the economy remains strong. According to measures from the Conference Board and the University of Michigan, consumer confidence has been improving.
As Tuan Nguyen of Real Economy noted, the revised GDP figures have eased earlier fears of a slowdown. The main factor behind the growth was stronger consumer spending, which is expected to continue driving the economy, even if private investment slows down in the coming months.
Other indicators, such as final sales to private domestic buyers—which exclude volatile factors like inventories and government spending—also saw an increase, suggesting underlying economic activity is solid.
The labor market also shows signs of resilience. While July's jobs report was weaker than expected, this may have been due to temporary factors like seasonal adjustments and weather. Weekly jobless claims, which can indicate layoffs, have stabilized at 231,000, hinting at a potential rebound. Economists now expect around 175,000 new jobs to be added in August, and the unemployment rate could drop to 4.2%.
Given these positive signs, talk of a sharp interest rate cut by the Federal Reserve in September seems less likely. As Nguyen pointed out, inflation appears to be under control, and a stable job market should continue to support consumer spending, keeping the economy on a steady path for the rest of the year.
