Key facts
- US GDP grew at a 1.5% annual rate in the second quarter, down from 2.1% in the first quarter.
- The PCE price index, favored by the Fed, rose 3.7% year-over-year in July, down from 4.1% in May.
- Core PCE inflation was up 3.3% year-over-year, little changed from May's 3.4% increase.
- The Federal Reserve held interest rates steady for the fifth consecutive meeting.
- The US job market added an average of 92,000 jobs per month this year.
The U.S. economy expanded at a sluggish 1.5% annual pace in the second quarter, a deceleration from the 2.1% growth seen in the first three months of the year, according to Commerce Department data. Rising imports contributed to the slowdown, although consumer spending showed an increase.
Inflation, as measured by the Federal Reserve's preferred gauge, the personal consumption expenditures (PCE) price index, rose 3.7% year-over-year in July. This marks a decrease from May's 4.1% increase, but remains above the central bank's 2% target. The core PCE price index, which excludes volatile food and energy prices, was up 3.3% annually, showing little change from the previous month.
Despite persistent inflation concerns, the Federal Reserve opted to maintain its benchmark interest rate at its current level for the fifth consecutive meeting. However, the decision was not unanimous, with three regional Fed presidents reportedly dissenting and favoring a rate hike to further combat elevated inflation.
The economic resilience has been notable, particularly in the job market, which has added an average of 92,000 jobs per month this year, a significant improvement from 2025. This strength in employment has provided consumers with the means to continue spending, even as high living costs remain a point of frustration for Americans.