US Economy Expands Slowly as Inflation Remains Stubborn

The US economy grew at a sluggish pace of 1.5% in the second quarter, according to the Commerce Department. This growth was weighed down by rising imports, which rose at an 11.5% pace due to a surge in shipments of computer chips and other products supporting AI investment. However, consumer spending remained strong, increasing at a 3.2% annual clip.

The Federal Reserve's preferred measure of inflation, the PCE price index, grew more slowly last month but still remains above the central bank's 2% target. Core consumer prices were up 3.3% from a year earlier, little-changed from May's increase. The Fed chose to leave its benchmark interest rate unchanged for the fifth straight meeting.

Economists are cautiously optimistic about the economy's resilience in the face of recent challenges, including the Iran war and energy price spikes. Business investment, excluding housing, rose at an 8.4% pace, down from 10.6% in the previous quarter but strong, reflecting a surge in AI investment.