US growth likely picked up last quarter after a sluggish start to 2024, reflecting resilient economy

WASHINGTON (AP) — The American economy, boosted by healthy consumer spending, is believed to have regained some momentum this spring after having begun 2024 at a sluggish pace.

The Commerce Department is expected to report Thursday that the gross domestic product — the economy’s total output of goods and services — increased at a solid if unspectacular 1.9% annual rate from April through June, according to a survey of forecasters by the data firm FactSet. That would be up from 1.4% annual growth in the January-March quarter.

Despite the likely uptick, the U.S. economy, the world’s largest, has clearly cooled in the face of the highest borrowing rates in decades. From mid-2022 through the end of 2023, annualized GDP growth had exceeded 2% for six straight quarters.

This year’s slowdown reflects, in large part, the much higher borrowing rates for home and auto loans, credit cards and many business loans resulting from the aggressive series of rate hikes the Federal Reserve imposed in its drive to tame inflation. The Fed raised its benchmark rate 11 times in 2022 and 2023, to its current 23-year peak of roughly 5.3%.

The Fed was responding to the flare-up in inflation that began in the spring of 2021 as the economy rebounded with unexpected speed from the COVID-19 recession, causing severe supply shortages. Russia’s invasion of Ukraine in February 2022 made things worse by inflating prices for the energy and grains the world depends on. Prices spiked across the country and the world.

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