The US economy grew at a 2 percent annual pace from January through March as consumers spent at the fastest pace in nearly two years, the government said Thursday in a sharp upgrade from its previous estimate.

The government had previously estimated that the economy expanded at a 1.3 percent annual rate last quarter.

The Commerce Department's third and final report on January-March economic growth pointed to surprising resilience but still marked a deceleration from the 2.6 percent annual rate from October through December and the 3.2 percent growth from July through September. The economy has been slowed by the Federal Reserve's aggressive drive to tame inflation through a series of interest rate hikes beginning early last year.

Yet Thursday's report on the nation's gross domestic product — the total output of goods and services — showed why the economy has so far managed to defy expectations of a coming recession : Consumers continue to spend even in the face of ever-rising borrowing costs. Their spending, which fuels about 70 percent of the economy, rose at a 4.2 percent annual rate in the January-March quarter, the most since April-June 2021.

The economy grew even though a cutback in business inventories shaved 2.1 percentage points off last quarter's growth rate. (AP)