The Commerce Department revised second-quarter U.S. economic growth up to a 2.2% inflation-adjusted annualized pace, as consumer spending and business investment drove the stronger reading. The estimate rose from 1.5%. Consumer spending increased 0.9%, while investment also surged, with AI-related spending contributing to the gain.
Where the Growth Came From
Consumer spending accounts for two-thirds of gross domestic product, putting household purchases at the center of the reported expansion. Spending rose 0.9% in the second quarter, its fastest pace in nearly two years. The Commerce Department had earlier estimated consumer spending growth at 0.1% for the quarter.
That change reshaped the picture of the quarter’s largest component. The first estimate placed consumer spending growth at a fraction of the figure now reported. The latest estimate records stronger spending, but it doesn’t break down which households spent more, what they bought, or how spending was distributed by income.
The revised 2.2% pace remained below the 2.5% annualized pace recorded in the first quarter. So the second-quarter figure marks a sharper rebound than initially estimated, but it isn’t faster than the pace reported for the prior quarter.
Business investment also surged in the second quarter. AI-related spending contributed to the increase, though the report gives no dollar amount for AI investment and doesn’t identify the companies making those investments. It offers no figures on business profits, wages, or how investment gains were distributed.
Borrowing Costs and Spending
The Federal Reserve raised interest rates, making borrowing more expensive for businesses and consumers. Higher borrowing costs can slow investment and spending, according to the report. Those are the same two categories—business investment and consumer spending—that helped drive the revised growth figure.
Atsi Sheth, Moody’s Ratings chief credit officer, said consumers and businesses kept spending and investing through the second quarter “despite higher inflation and interest rate uncertainty.” Sheth made the statement on Wednesday, when officials released the revised figures.
The report provides no figures on household debt, workers’ pay, employment, or the share of income going to businesses or consumers. It records aggregate spending and investment, rather than showing how economic income is divided. No unions, strikes, or worker organizing appear in the account, and it describes no government proposal to change that distribution.
What the Estimate Measures
Economists had expected the earlier growth reading to hold, according to FactSet consensus estimates. Instead, the updated estimate put annualized second-quarter growth at 2.2%, 0.7 percentage points above the previous 1.5% estimate. The Commerce Department’s revised consumer-spending figure rose from 0.1% to 0.9%.
The figures identify consumer spending and business investment as sources of growth. They also show that the Federal Reserve’s higher interest rates make borrowing more expensive, a condition that can restrain both. The report doesn’t say what portion of growth produced higher profits or improved workers’ living standards. The story remained under development and subject to updates.