US economy posts 2.8 percent growth in April-June quarter

Washington: The US economy, despite high interest rates, grew at 2.8 percent in the second quarter -- double the rate of 1.4 percent that it saw in the January-March period. The significant growth is mainly attributed to increased consumer spending and inventory building, AFP reported on Thursday quoting government data.

After a slow start this year, the world's biggest economy grew at an annual rate of 2.8 percent in the April to June period, up from 1.4 percent in the first three months, said the Commerce Department.

The initial estimate was markedly above the 1.9 percent growth rate economists anticipated -- a reassuring sign that consumption remains resilient.

President Joe Biden hailed the economy's strength in a statement, adding he had "more to do" in his last six months in the White House.

Biden, who endorsed Vice President Kamala Harris after his historic decision to drop out of the 2024 election, added: "The Vice President and I will keep fighting for America's future."

The acceleration "primarily reflected an upturn in private inventory investment and an acceleration in consumer spending," said the Commerce Department.

This was "partly offset by a downturn in residential fixed investment," it added.

While sectors like manufacturing and housing have been struggling after the Federal Reserve rapidly hiked interest rates in 2022 to combat surging inflation, consumption has been stronger than analysts expected.

This boosted the economy despite rates hovering at their highest levels in more than two decades, making borrowing more expensive for individuals and companies.

A key factor underpinning consumption has been the labor market, which saw continued wage growth and businesses reluctant to let go of workers after difficulties in hiring during the pandemic.

With inflation slowing and salaries still growing, economists said consumers' real disposable income gains became bigger, allowing them to keep dipping into their wallets.

Despite the economy outperforming predictions of possible recession, Biden has struggled to assuage concerns of many Americans feeling the pinch from higher costs of living.

With his shock exit from the 2024 election, it remains to be seen if that negative sentiment will transfer to his likely Democratic replacement Harris, AFP report said.