US GDP growth slows to 1.5% in Q2 as core inflation holds at 3.3%
US economic growth slowed to a 1.5% annualized rate in the second quarter, missing expectations, while core inflation held steady at 3.3% in June. The slowdown was driven largely by a decline in federal government spending and inventories rather than weaker consumer demand.
The US Commerce Department reported that gross domestic product expanded at a 1.5% annualized rate in the second quarter, below Wall Street forecasts and a step down from the prior quarter's pace. Economists had projected growth closer to 2%.
Officials pointed to a pullback in federal government spending and a drawdown in business inventories as the main drags on the headline number, rather than a retreat in household consumption, which held up better than expected. Core inflation, which excludes volatile food and energy prices, came in at 3.3% for June, unchanged from the prior month.
The data lands as the Federal Reserve weighs how long to hold interest rates steady, with policymakers already grappling with the economic fallout of the war between the United States and Iran. Investors will watch upcoming reports closely for signs of whether the slowdown deepens or proves temporary.
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