US Q2 GDP Growth Slows Unexpectedly to 1.5% Amid Mixed Economic Signals
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- US Q2 GDP grew 1.5%, missing 2.1% forecasts.
- Consumer spending rose; rising imports and government spending offset investment strength, slowing US GDP.
- Inflation cooled but remains high; Fed rate hike expectations ease.
The U.S. economy expanded at an unexpectedly slower pace in the second quarter, with real gross domestic product (GDP) increasing by an annualized 1.5%. This figure fell short of economists’ expectations for a 2.1% rise and marked a deceleration from the 2.1% growth recorded in the first quarter. While consumer spending showed a significant acceleration, rising 3.2% compared to 0.5% previously, the overall slowdown was primarily attributed to a downturn in government spending. Additionally, the GDP price deflator surged to 6.3%, significantly above the 3.9% forecast, indicating persistent inflationary pressures despite the slower economic expansion. Core PCE prices, a key inflation gauge, also registered 3.4% quarter-over-quarter, slightly below the 3.5% expectation.
The US economy’s 1.5% Q2 growth was influenced by rising imports, even as consumer spending rose and there was ongoing strength in investment. The Federal Reserve’s favored inflation measure showed a slower pace of growth last month, though it remained above the central bank’s 2% target. This combination of softer GDP growth and cooler inflation has contributed to a further cooling in Federal Reserve interest rate hike expectations.