Spring surge in US economy beats expectations

US economic growth picked up this spring, despite a slowdown in consumer spending.

The world's largest economy expanded at an annual rate of 2.4% in the three months to June, accelerating from a rate of 2% in the prior quarter.

That was far better than expected, lifted by a jump in business investments.

Consumer spending increased at an annual rate of 1.6%, slowing after a surge at the start of the year.

Analysts have been warning of slowdown as the US central bank, the Federal Reserve, raises interest rates sharply to try to stabilise prices, which soared last year.

Businesses and households have proven resilient, despite the rise in borrowing costs.

That may help the US economy avoid a recession, but some economists also warned it may make it more difficult to root out the inflation pressures - potentially leading to even higher interest rates in the months ahead.

"While this growth is a positive sign of a strengthening economy, high demand will also reinforce the inflationary pressures that are an ongoing concern for the Fed," said Richard Flynn, managing director at Charles Schwab UK.

"As long as the labour market remains tight and inflation remains above the central bank's 2% target, we can expect to see further rate increases in the coming months."