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US economic growth was stronger than previously reported earlier in the year – news that could reinforce the case for higher interest rates in the world’s largest economy.
The Commerce Department said the latest data showed the US economy grew at an annual rate of 2% for the first three months of the year.
The rise reflected stronger consumer spending than previously thought.
The US Federal Reserve has attempted to cool the economy to alleviate the pressures that are pushing up prices.
It has raised its key interest rate by five percentage points to over 5% since March 2022, signaling that further rate hikes are imminent.
The measures had raised fears they could lead to a painful slowdown as higher interest rates weigh on activity such as spending and business expansion.
Many companies had expressed concerns about the outlook earlier in the year, but hiring numbers remained high and other data painted a better picture.
In addition to consumer spending, the Commerce Department said on Thursday that exports were also higher than previously reported.
“Another story about growth shifts. There is little sign of slowing down,” Diane Swonk, chief US economist at KPMG, tweeted in response to the report.
Analysts said the report did not change the overall picture of inflation. According to the Department of Labor, US consumer prices rose 4% in the 12 months ended May. That was the slowest pace in two years and reflects the fall in fuel costs since last year’s spike.
But the prices of many other items have also continued to rise. So-called core inflation, which excludes energy and food items and which economists say is a better measure of underlying pressures, was 5.3%.
At a meeting in Europe this week, Federal Reserve Chairman Jerome Powell said he doesn’t think current policies are doing enough to fight inflation.
“Although the policy is restrictive, it may not be restrictive enough and it has not been restrictive long enough,” Powell said during a panel discussion hosted by the European Central Bank in Portugal.
Scott Hoyt, senior director at Moody’s Analytics, said he expects the economy to struggle as the Fed focuses on fighting inflation, but still manages to avoid an outright decline.
“The economy remains admirably resilient and the likelihood of a recession beginning this year is diminishing. But the situation is far from clear,” he said.
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