Thu Sep 26 14:12:52 UTC 2024: ## US Economy Shows Resilience Despite Fed Rate Hikes, Expanding at 3% in Q2
**Washington, D.C. -** The American economy expanded at a healthy 3% annual pace in the second quarter of 2024, fueled by strong consumer spending and business investment, the Commerce Department announced Thursday. This confirms the department’s previous estimate, indicating continued economic growth despite aggressive interest rate hikes by the Federal Reserve.
The robust performance came after a slower 1.6% growth rate in the first quarter. Consumer spending, the primary driver of the economy, grew by 2.8% in the second quarter, while business investment saw a vigorous 8.3% increase, driven by a surge in equipment investment.
The US economy has shown resilience in the face of eleven interest rate hikes implemented by the Federal Reserve in 2022 and 2023 to combat inflation. Inflation, as measured by the consumer price index, has cooled down significantly, falling from a peak of 9.1% in mid-2022 to 2.5% currently, barely above the Fed’s 2% target.
Despite the rising borrowing costs, the economy has continued to grow, and employers have maintained hiring. However, recent months have seen a slight weakening in the job market, with average job creation slowing down. The unemployment rate has also risen to 4.2% from last year’s half-century low of 3.4%.
In response to declining inflation and a softening job market, the Federal Reserve last week cut its benchmark interest rate by a significant half-point, the first such cut in over four years. This move signals the Fed’s shift in focus to bolstering the job market now that inflation is largely under control.
Other economic indicators remain positive. Consumer spending at retailers increased last month, suggesting consumer confidence despite inflation and high borrowing rates. Industrial production rebounded, and single-family-home construction experienced a sharp rise compared to the previous year. Consumer sentiment also rose for the third consecutive month, driven by more favorable prices for durable goods.
While the Federal Reserve believes inflation is largely conquered, many Americans continue to feel the impact of high prices for essentials. The Commerce Department will release its initial estimate of GDP growth for the July-September quarter on October 30. The Federal Reserve Bank of Atlanta forecasts a 2.9% annual pace for the third quarter.
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