US Economy Faces Mounting Risks from Iran and Inflation

The US economy has shown resilience despite facing elevated inflation and global energy shocks. However, it is now facing significant risks from renewed fighting in Iran and potential rate increases from the Federal Reserve later this year.

According to a recent snapshot, the economy grew at a 1.5% pace in the second quarter, down from 2.1% in the first three months of the year. Consumer spending, which accounts for 70% of US economic activity, climbed at a 3.2% pace in the second quarter.

AI-fueled business spending also increased strongly in the second quarter, up 8.4%. However, despite Americans continuing to spend and keeping the economy afloat, budgets are facing mounting strains due to five years of elevated inflation and a recent slowdown in real wages.