US Economy Expands at Sluggish Pace as Inflation Remains High
The US economy expanded at an annual rate of 1.5% in Q2, according to the Commerce Department's latest figures. This represents a slowdown from the previous quarter's growth rate of 2.1%. Consumer spending was a key driver of this growth, increasing by 3.2% annually.
Business investment also contributed to the economy's expansion, rising at an 8.4% pace. However, imports weighed heavily on growth, shaving off 1.5 percentage points from GDP. The surge in AI investment was a significant factor behind this increase in business spending.
The inflation rate remained above the Federal Reserve's target of 2%, with the PCE price index rising by 3.7% year-over-year. Despite this, core consumer prices were little changed from May, and actually fell by 0.1% from month to month due to a drop in energy prices.
Fed officials are growing impatient with progress against inflation, which has been above target for over five years. Three regional Fed presidents dissented from the decision to leave interest rates unchanged, calling for an increase to combat elevated inflation.