US economic growth in the last quarter was revised up sharply to an annual rate of 2%.

WASHINGTON (AP) — The US economy has shown surprising resilience in the face of higher interest rates, growing at an annual rate of 2% from January to March as consumers spent at the fastest pace in nearly two years.

Thursday’s revised figure from the Commerce Department sharply raised its assessment of growth in the first quarter from its previous estimate of 1.3% annual rate.

Despite the slight uptick, the government’s third and final report on economic growth for the January-March period still marked a slowdown from Annual rate of 2.6% from October through December and the 3.2% growth from July through September. The economy has slowed due to the Federal Reserve’s aggressive drive to tame inflation through a series of interest rate increases that began early last year.

However, Thursday’s report on the country’s gross domestic product – the total output of goods and services – showed why the economy has so far managed to challenge Predictions of the next recessionConsumers continue to spend despite ever-increasing borrowing costs. Their spending, which feeds about 70% of the economy, rose at an annual rate of 4.2% in the January-March quarter, the highest rate since April-June 2021.

The increase in petroleum exports and other exports also contributed to raising the growth estimates during the first quarter. The economy managed to expand at a decent pace despite business inventories shrinking by 2.1 percentage points from the rate of growth in the quarter.

The Fed has it It raised the benchmark interest rate 10 times Since March 2022 in his attack on inflation hit the highest level in four decades at 9.1% last year but since then slowed to 4%. Central bank interest rate increases made mortgages, auto loans, credit cards, and business borrowing more expensive and more widespread. Predictions of an economic downturn It is inevitable.

But the economy has proven unexpectedly durable. Retail sales rose last month Although still high inflation pressures and high borrowing costs. Government reports showed recent gains in new home sales and orders for long-term manufactured goods. Added bosses with a healthy average of 314,000 jobs month so far this year, with The unemployment rate is 3.7%.is still close to its lowest level in half a century.

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In another sign of labor market continuity, the Labor Department reported that more Americans are filing for unemployment benefits Last week it dropped 26,000 to 239,000.

In the current April-June quarter, the economy is believed to slow down further but still manage to maintain its growth. Economists surveyed by data firm FactSet estimated that annual growth for the quarter would come in at 1%.

“While the economy beat expectations, our bottom line is that the lagging and cumulative effects of constraining (interest rates) will slow the pace of activity going forward,” Rubella Farooqui, chief US economist at High Frequency Economics, said in a research note. .