Excluding government spending and trade, growth came in at a healthy 3.9% annualized rate
The Commerce Department reported that the US economy grew at an annual rate of 1.5% between April and June, down from 2.1% in the first quarter and below economists’ expectations of 1.8%.
Beneath the headline GDP figures, the US economy remained resilient. Excluding government spending and trade, growth came in at a healthy 3.9% annualized rate despite geopolitical uncertainty tied to the war in Iran. Analysts say it’s largely driven by robust consumer demand.
Consumer spending growth jumped to 3.2% from 0.5% in the previous quarter. Experts attribute the strength to a June drop in gasoline prices following a temporary ceasefire in the Iran conflict.
Separate data showed that the Personal Consumption Expenditures (PCE) price index, the Federal Reserve’s preferred inflation measure, fell 0.1% on a seasonally adjusted basis during the month, leaving annual inflation at 3.7%. Both readings met analysts’ expectations.
AI is also having an impact
Corporate spending on artificial intelligence infrastructure is surging, fueling billions of dollars in investment.
But because much of the chips and equipment needed for those projects is brought in from other countries, the resulting spike in imports became a drag on second-quarter growth, even as consumers continued to spend.
Economy remains resilient
The conflict in the Middle East continued to influence the economy by keeping energy prices elevated.
Despite slower growth, the US economy has remained resilient. A stronger job market and steady hiring have supported consumer spending, while the Federal Reserve kept interest rates unchanged for a fifth consecutive meeting as it continues to monitor inflation closely.