GDP grew more than expected in the second quarter of 2023

Consumer spending and increased business investment, particularly in manufacturing, contributed to GDP growth.

The Department of Commerce reported than the country's gross domestic product (GDP), adjusted for inflation, increased to an annual rate of 2.4% in the second quarter of 2023. The figure was higher than the 2% recorded in the first three months of the year and stronger than the experts' estimate of 1.5%.

GDP growth

Consumer spending contributed to growth as well as businesses that boosted their investments, particularly in manufacturing. Consumer spending increased at a rate of 1.6%, driven largely by spending on services. Within services, the main ones were housing and utilities, financial services, health care, insurance and transportation. In terms of goods, the increase was led by recreational goods and vehicles, as well as gasoline and other energy goods.

"Compared to the first quarter, the acceleration in GDP in the second quarter primarily reflected an upturn in private inventory investment and an acceleration in nonresidential fixed investment. These movements were partly offset by a downturn in exports, and decelerations in consumer spending, federal government spending, and state and local government spending," according to the Department of Commerce.

The data comes a day after the Federal Reserve raised the interest rate to 5.5%, its highest level in 22 years, in its attempt to control inflation:

The Committee decided to raise the target range for the federal funds rate from 5% to 5.5%. percent. The Committee will closely monitor incoming information and assess the implications for monetary policy.

The hike comes just a month after the Fed put a pause and halted the steady rate hike it had been making since March 2022. However, officials stated at the time that adjustments would continue to be made to reach the inflation target of around 2%.