WASHINGTON (AP) — The U.S. economy expanded at a 2.1% annual pace from April through June, showing continued resilience in the face of higher borrowing costs for consumers and businesses, the government said Wednesday in a downgrade from its initial estimate.

The government had previously estimated that the economy expanded at a 2.4% annual rate last quarter.

The Commerce Department’s second estimate of growth last quarter marked a slight acceleration from a 2% annual growth rate from January through March. Though the economy has been slowed by the Federal Reserve’s strenuous drive to tame inflation with interest rate hikes, it has managed to keep expanding, with employers still hiring and consumers still spending.

Wednesday’s report on the nation’s gross domestic product — the total output of goods and services — showed that growth last quarter was driven by upticks in consumer spending, business investment and outlays by state and local governments.

Consumer spending, which accounts for about 70% of the U.S. economy, rose at a 1.7% annual pace in the April-June quarter — a decent gain, though down from 4.2% in the first three months of 2023. Excluding housing, business investment rose at a strong 6.1% annual rate last quarter. Investment in housing, hurt by higher mortgage rates, fell in the second quarter.

The American economy — the world’s largest — has proved surprisingly durable in the midst of the Fed’s aggressive campaign to stamp out a resurgence of inflation, which last year hit a four-decade high. Since March of last year, the Fed has raised its benchmark rate 11 times, making borrowing for everything from cars to homes to business expansions much more expensive and prompting widespread predictions of a coming recession.

Since peaking at 9.1% in June 2022, year-over-year inflation has fallen more or less steadily. Last month, it came in at 3.2% — a significant improvement though still above the Fed’s 2% inflation target. Excluding volatile food and energy costs, so-called core inflation in July matched the smallest monthly rise in nearly two years.

Wednesday’s GDP report contained some potentially encouraging news for the Fed: One measure of prices — the personal consumption expenditures index — rose at a 2.5% annual rate last quarter, down from a 4.1% pace in the January-March quarter and the smallest increase since the end of 2020.