The U.S. economy grew at a faster-than-expected rate of 2.8% in the second quarter, according to the Commerce Department’s initial estimate. This growth rate, adjusted for inflation and seasonality, exceeded economists’ forecasts of 2.1% and was a marked improvement from the 1.4% growth recorded in the first quarter.
Consumer spending played a significant role in this economic uptick, with the personal consumption expenditures (PCE) index—a key measure of consumer activity—rising by 2.3%. This increase was up from a 1.5% growth rate in the previous quarter. Both goods and services spending contributed to this boost.
The economy also benefited from a notable increase in private inventory investment and nonresidential fixed investment. Inventories added 0.82 percentage points to the GDP growth, while government spending, particularly in defense, provided additional support, rising by 3.9% overall and 5.2% in defense outlays.
Despite these positive indicators, there were some areas of concern. The personal savings rate continued to decline, falling to 3.5% from 3.8% in the first quarter. Additionally, imports surged by 6.9%, which detracts from GDP, while exports grew by just 2%.
Inflation showed signs of easing, with the PCE price index increasing by 2.6% for the quarter, down from 3.4% in the first quarter. The core PCE, which excludes volatile food and energy prices and is closely watched by the Federal Reserve as a measure of underlying inflation, rose by 2.9%, a decrease from the previous quarter’s 3.7%.
Financial markets reacted positively to the report, with stock futures rising and Treasury yields falling. Joseph Brusuelas, chief economist at RSM, commented that the report suggests the U.S. economy is experiencing a productivity boom that could lead to higher living standards through lower inflation, low unemployment, and rising real wages.
Treasury Secretary Janet Yellen, speaking in Rio de Janeiro, highlighted the GDP report as a positive sign for the U.S. economy, indicating steady growth and declining inflation.
