US Economy Likely Maintained Steady Pace in Q2

The US economy likely maintained its steady pace of growth in the second quarter, driven by stronger consumer spending and robust business investment in equipment tied to artificial intelligence infrastructure. According to economists, the GDP is expected to have increased at a 2.1% annualized rate, matching the previous quarter's pace.

Consumer spending, which accounts for more than two-thirds of US economic activity, accelerated after slowing down in the first quarter. Generous tax refunds from President Donald Trump's 'One Big Beautiful Bill' and higher-income households benefiting from strong growth in asset prices drove this increase.

However, economists warned that trade could subtract as much as a full percentage point from GDP growth, and the U.S.-led war with Iran poses a downside risk to growth in the second half of the year. The rapid growth in AI investment is masking weakness in business investment in structures, such as factories.

The Federal Reserve is expected to raise interest rates as soon as September to quell inflation, which also factors into their expectations for slower growth in the second half. Residential investment is expected to have contracted for the sixth consecutive quarter.