US Economy Stalls at 1.5% Growth in Second Quarter Amid Stubborn Inflation

The US economy expanded at a sluggish 1.5% pace from April through June due to rising imports, which weighed on growth. However, consumers continued to spend, with consumer spending increasing at a 3.2% annual clip.

Business investment, excluding housing, rose at an 8.4% pace, reflecting a surge in investment in artificial intelligence. The Commerce Department reported that imports shaved 1.5 percentage points off second-quarter GDP growth.

The personal consumption expenditures (PCE) price index, the one favored by the Fed, rose 3.7% last month from June 2025, down from a 4.1% year-over-year increase in May. Excluding volatile food and energy prices, so-called core consumer prices were up 3.3% from a year earlier.

The Federal Reserve's favored measure of inflation grew more slowly last month, but remained above the central bank's 2% target. Three regional Fed presidents dissented, saying they wanted to raise rates to combat elevated inflation.