US economy grew 2.2% this spring, more than initially estimated

By Elisabeth Buchwald, CNN

(CNN) — Despite skyrocketing gas prices, the US economy was remarkably resilient this spring.

Gross domestic product grew at a 2.2% inflation-adjusted annualized pace in the second quarter, a sharper rebound than the 1.5% rate previously estimated as stronger consumer spending and business investment helped power growth.

Economists were expecting the prior reading to hold, according to FactSet consensus estimates.

Still, last quarter’s GDP reading is lower than the first quarter, when the economy grew at a 2.5% annualized pace.

Consumer spending, which accounts for two-thirds of GDP, soared by 0.9% last quarter, the fastest pace in nearly two years. The Commerce Department previously estimated a 0.1% pace for consumer spending last quarter.

Business investment also surged last quarter with AI-related spending.

“Today’s US GDP data shows that consumers and businesses kept spending and investing through the second quarter, despite higher inflation and interest rate uncertainty,” Atsi Sheth, Moody’s Ratings chief credit officer, said in a statement on Wednesday.

But there’s reason to believe this momentum will level off, especially since the Federal Reserve raised interest rates, which makes it more expensive for businesses and consumers to borrow money. In turn, that can slow investment and spending.

Several Fed officials have recently signaled that further rate hikes may be merited to keep inflation from becoming more entrenched.

Americans already are growing increasingly pessimistic about the state of the economy: Consumer confidence fell this month to its lowest level in 12 years, according to data released Tuesday by the Conference Board. Americans’ assessments of both current and future economic conditions deteriorated and more said a recession is likely in the next 12 months.

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