The U.S. Economy expanded at a 1.5% rate in the second quarter, a deceleration from the 2.1% growth recorded in the first three months of the year and below what economists had anticipated. Rising imports contributed to the slower expansion, though consumer spending increased during the period.
The Federal Reserve's preferred inflation gauge, the personal consumption expenditures price index, rose 3.7% in the most recent month compared to a year earlier, down from a 4.1% year-over-year increase in May. Core consumer prices, which exclude volatile food and energy costs, were up 3.3% from a year earlier, largely unchanged from the previous month's 3.4% increase. Both measures remain above the Fed's 2% target.
The Federal Reserve left its benchmark interest rate unchanged at its latest meeting, marking the fifth consecutive decision to hold rates steady. However, three regional Fed presidents dissented, indicating they favored raising rates to address persistent inflation.
The job market has shown improvement this year, with employers adding an average of 92,000 jobs monthly, a substantial increase from fewer than 10,000 jobs per month in 2025. This employment gains have bolstered consumer purchasing power, though elevated costs continue to concern Americans ahead of November's midterm elections.
The economy has demonstrated resilience despite geopolitical tensions and associated energy price increases. Still, inflation remains elevated above the Federal Reserve's target, sustaining frustration among consumers over the cost of living.
The report released Thursday represents the first of three Commerce Department estimates for second-quarter economic growth.