US Economy Expands at Sluggish Pace Amid High Inflation

The US economy experienced a sluggish growth rate of 1.5% in the second quarter, down from 2.1% in the previous quarter. Consumer spending accounted for about 70% of this activity and increased at an annual pace of 3.2%, up from 0.5% in January-March. However, imports rose at an 11.5% pace, partly due to a surge in computer chip shipments, which shaved off 1.5 percentage points from GDP growth.

Business investment, excluding housing, rose at an 8.4% pace, reflecting a surge in AI investment. The Commerce Department's personal consumption expenditures (PCE) price index rose 3.7% last month from June 2025, but core consumer prices were up 3.3% from a year earlier.

The Federal Reserve's favored measure of inflation has been above its 2% target for more than five years, and some officials are getting impatient with progress against inflation. The Fed chose to leave its benchmark interest rate unchanged for the fifth straight meeting, but three regional presidents dissented, saying they wanted to raise rates to combat elevated inflation.