Townhomes under construction are shown in Mars, Pa., on May, 27, 2022. On Thursday, Freddie Mac reports on this week's average U.S. mortgage rates. (AP Photo/Gene J. Puskar, File)
By Paul Wiseman and Christopher Rugaber
The U.S. economy grew at a 2.1% annual pace from April through June, extending its sturdy performance in the face of higher interest rates, the government said Thursday, leaving its previous estimate unchanged.
The second-quarter expansion of the nation's gross domestic product — its total output of goods and services — marked a modest deceleration from the economy's 2.2% annual growth from January through March.
Consumer spending, business investment and state and local government outlays drove the second-quarter economic expansion.
The economy and job market have shown surprising resilience even as the Federal Reserve has dramatically raised interest rates to combat inflation, which last year hit a four-decade high. The Fed has raised its benchmark rate 11 times since March 2022, sparking concerns that ever-higher borrowing rates will trigger a recession.
So far, though, inflation has eased without causing much economic pain, raising hopes that the central bank can pull off a so-called soft landing — slowing the economy enough to conquer high inflation without causing a painful recession.
Still, those higher rates have taken a toll. Consumer spending, for example, rose at an annual rate of just 0.8% from April through June, down sharply from the government's previous estimate of 1.7% and the weakest such figure since the first quarter of 2022.
But business investment excluding housing, a closely watched barometer, rose at a 7.4% annual pace, the fastest rate in more than a year. And state and local government spending and investment jumped 4.7%, the biggest such quarterly gain since 2019.
Thursday's report was the government's third and final estimate of economic expansion in the April-June quarter.
Growth is believed to be accelerating in the current July-September quarter, fueled in part by many still-free-spending consumers. Americans, for example, flocked to theaters for the hit summer movies “Barbie” and “Oppenheimer” and splurged on Taylor Swift and Beyonce tickets. Business investment is also thought to have remained solid.
Economists have estimated that the economy expanded at a roughly 3.2% annual rate in the third quarter, which would be the fastest quarterly growth in a year. Even more optimistic estimates have projected that growth from July through September exceeded a 4% annual rate, according to the Federal Reserve Bank of Atlanta.
Even so, the acceleration in growth isn’t likely to endure. The economy is expected to weaken in the final three months of the year. Hiring and income growth are slowing. And economists think the savings that many Americans amassed during the pandemic from federal stimulus checks will have evaporated by next quarter.
The economy also faces an array of obstacles that are expected to hobble growth. They include surging oil prices, the resumption of student loan payments, the effects of the United Auto Workers strike, the loss of pandemic-era child care aid and a likely government shutdown beginning this weekend.
The combined effects of those factors will hamper Americans’ ability to spend and likely weaken the economy.
“Growth remains positive and is set to accelerate" in the current quarter, said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.
”But the trend going forward, particularly in household spending, will be important. We continue to forecast positive growth going forward but expect the pace to slow quite significantly" in the final three months of the year.
Chris Williamson, Chief Business Economist at S&P Global, breaks down September’s CPI print and inflation trends, explaining what it means for markets.
A big-screen adaptation of the anime “Chainsaw Man” has topped the North American box office, beating a Springsteen biopic and “Black Phone 2.” The movie earned $17.25 million in the U.S. and Canada this weekend. “Black Phone 2” fell to second place with $13 million. Two new releases, the rom-com “Regretting You” and “Springsteen — Deliver Me From Nowhere,” earned $12.85 million and $9.1 million, respectively. “Chainsaw Man – The Movie: Reze Arc” is based on the manga series about a demon hunter. It's another win for Sony-owned Crunchyroll, which also released a “Demon Slayer” film last month that debuted to a record $70 million.
The Federal Aviation Administration says flights departing for Los Angeles International Airport were halted briefly due to a staffing shortage at a Southern California air traffic facility. The FAA issued a temporary ground stop at one of the world’s busiest airports on Sunday morning soon after U.S. Transportation Secretary Sean Duffy predicted that travelers would see more flights delayed as the nation’s air traffic controllers work without pay during the federal government shutdown. The hold on planes taking off for LAX lasted an hour and 45 minutes and didn't appear to cause continued problems. The FAA said staffing shortages also delayed planes headed to Washington, Chicago and Newark, New Jersey on Sunday.
Boeing workers at three Midwest plants where military aircraft and weapons are developed have voted to reject the company’s latest contract offer and to continue a strike that started almost three months ago. The strike by about 3,200 machinists at the plants in the Missouri cities of St. Louis and St. Charles, and in Mascoutah, Illinois, is smaller in scale than a walkout last year by 33,000 Boeing workers who assemble commercial jetliners. The president of the International Association of Machinists says Sunday's outcome shows Boeing hasn't adequately addressed wages and retirement benefits. Boeing says Sunday's vote was close with 51% of union members opposing the revised offer.
The stunning indictment that led to the arrest of more than 30 people — including Miami Heat guard Terry Rozier and other NBA figures — has drawn new scrutiny of the booming business of sports betting in the U.S. The multibillion-dollar industry has made it easy for sports fans — and even some players — to wager on everything from the outcome of games to that of a single play with just a few taps of a cellphone. But regulating the rapidly-growing industry has proven to be a challenge. Professional sports leagues’ own role in promoting gambling has also raised eyebrows.
Tesla, the car company run by Elon Musk, reported Wednesday that it sold more vehicles in the past three months after boycotts hit hard earlier this year, but profits still fell sharply. Third-quarter earnings fell to $1.4 billion, from $2.2 billion a year earlier. Excluding charges, per share profit of 50 cents came in below analysts' estimate. Tesla shares fell 3.5% in after-hours trading. Musk said the company's robotaxi service, which is available in Austin, Texas, and San Francisco, will roll out to as many as 10 other metro areas by the end of the year.
