US GDP Slows to 1.5%, Consumer Spending Supports Economy

The US economy expanded at an annualized rate of 1.5% in the second quarter, missing estimates of 1.8%. This slowdown was largely due to lower-than-expected growth in business investment and government spending.

However, consumer spending remained a key source of resilience, accelerating to a 3.2% annualized pace during the quarter. Household spending accounted for more than two-thirds of US economic output, cushioned by larger tax refunds and wealthier consumers' continued spending on asset prices.

The personal consumption expenditures price index (PCEPI), the inflation measure most closely watched by the Federal Reserve, declined 0.1% on a monthly basis in June, marking its weakest reading since April 2020. Annual headline inflation remained at 3.7%, still significantly above the central bank's 2% objective.