U.S. Economy Grew a Robust 2.8% in Second Quarter

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The U.S. economy accelerated in the second quarter as consumers increased their spending, businesses invested more in equipment and stocked inventories, and inflation cooled.

Gross domestic product—the value of all goods and services produced in the U.S., adjusted for inflation and seasonality—rose at an annual rate of 2.8% for April through June, the Commerce Department said Thursday. That was more than the 1.4% rate during the first quarter, and well above the 2.1% rate economists had expected before the report.

Household spending, the main driver of the U.S. economy, increased at a 2.3% rate in the second quarter, picking up from 1.5% in the first. Spending on goods increased while services spending moderated slightly.

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The pickup in consumer and business spending offset negative developments such as a decline in spending on residential investment. The spring home-buying season, usually the busiest time of year for the housing market, was a dud thanks to high prices and elevated mortgage rates. Sales of existing homes declined in June for the fourth straight month, but prices hit a record, locking out many would-be buyers.

A key category of business spending picked up: Nonresidential fixed investment, reflecting spending on commercial construction, equipment and software, rose at a 5.2% rate. Capital expenditures were led by 11.6% growth in spending on equipment, while spending on structures declined.

Excluding volatile food and energy prices, the personal-consumption expenditures price index rose 2.9% in the second quarter at an annualized rate, cooling from 3.7% in the first quarter.

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While the U.S. by many measures is doing well even amid high rates, and the pace of inflation has cooled, many Americans are unhappy that prices for groceries, cars and homes are so much higher than they were a few years ago.

And even though predictions of a recession have faded, there are signs of weakness.

A red-hot jobs market, which allowed millions of Americans to switch to jobs that paid more or fit them better, is starting to slow. Although the unemployment rate is still historically low, employers added jobs at a slower pace in the second quarter compared with the first.

Consumers are also facing mounting headwinds from still-high borrowing costs.

Companies are warning that consumers are increasingly tapped out. Packaged-food companies PepsiCo and Conagra Brands earlier this month reported weak quarterly results and said they see U.S. shoppers under pressure.

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