The latest data, released Thursday by the Commerce Department, exceeds the 1.8 percent rate economists polled by Bloomberg predicted — a pleasant surprise that underscores the resilience of the U.S. economy even as inflation cools.
The higher-than-expected number comes after Federal Reserve Chair Jerome Powell announced Wednesday that Fed staff no longer predict a recession, reversing its March prediction that a “mild recession” could hit later this year.
Inflated has fallen as the Fed continues to raise interest rates, and Thursday’s figures indicate core inflation is down again.
The personal consumption expenditures (PCE) price index advanced
2.6 percent in the second quarter compared to 4.1 percent in the first quarter.
“Core” PCE inflation also dipped to 3.8 percent, down from 4.9 percent in the first quarter. The Fed pays special attention to this metric, which excludes food and energy prices that may fluctuate due to factors like weather and geopolitical pressures.
While the Fed has tried to cool the hot labor market in its crusade to curb inflation, the latest data suggest workers are actually getting more productive.
“2.4 percent growth in value added for non-farm business, coupled with near flat index for aggregate hours and drop in self-employment implies strong productivity growth in [the second quarter],” economist Dean Baker with the Center for Economic and Policy Research wrote online.
Massive subsidy- and tax credit-heavy bills — including the Inflation Reduction Act, the CHIPS Act and the Infrastructure Investment and Jobs Act — have also fueled a boom in factory construction and investment, bolstering strong GDP growth.
The Hill’s Tobias Burns has more here.
