The U.S. Economy Grew At An Impressive Annual Rate Of 2.8% Last Quarter.

The U.S. economy grew at an impressive annual rate of 2.8% last quarter, surpassing expectations and showing resilience despite high interest rates. This growth, reported by the Commerce Department, was higher than the 1.4% rate in the first quarter and well above the forecasted 1.9% rate.

Consumer spending, which makes up about 70% of the economy, played a key role in this growth. Spending on goods like cars and appliances rose significantly. Business investments also increased, with a notable 11.6% rise in equipment investments. However, a surge in imports, which are subtracted from GDP, slightly reduced the growth rate.

Inflation continued to ease, with the Personal Consumption Expenditures (PCE) price index, the Federal Reserve's preferred measure, rising at a slower 2.6% annual rate, down from 3.4% in the previous quarter. Excluding food and energy, core PCE inflation also slowed to 2.9% from 3.7%.

These positive economic indicators suggest that the Federal Reserve might soon cut interest rates. The Fed had raised rates significantly in 2022 and 2023 to combat inflation, which spiked due to rapid economic recovery post-COVID-19 and the impact of the Ukraine conflict. Despite these rate hikes, the economy remained strong, driven by consumer spending supported by a robust job market and savings from the pandemic period.

​The outlook for the rest of the year is cautiously optimistic. While the labor market shows signs of slowing, which could affect wages, expected interest rate cuts could reduce borrowing costs for consumers and businesses. There are concerns about potential new tariffs and slowing state and local government revenues, but a recession is not anticipated. The economy is expected to keep growing, bolstered by anticipated monetary policy easing.