The U.S. economy expanded at an annual rate of 1.5% during the second quarter, according to a Commerce Department report released Thursday. This represents a deceleration from the first quarter’s 2.1% growth rate. The slowdown was driven primarily by reduced government spending and a surge in imports, which subtract from domestic GDP calculations.
Consumer spending emerged as the primary economic engine, expanding at a solid 2.1% pace during the second quarter. However, analysts question the sustainability of this spending trajectory as households face mounting inflationary pressures. A separate Commerce Department report indicated that prices in June were up 3.7% from a year earlier, outpacing recent wage gains. This dynamic has prompted consumers to draw down savings or increase borrowing to maintain their spending levels. The personal savings rate declined to 2.7% in June, marking a three-year low.
Inflation remained a key concern for policymakers. The Commerce Department’s inflation measure, which is closely monitored by the Federal Reserve, continues to exceed levels preferred by the central bank. Despite these pressures, the Federal Reserve chose not to increase its benchmark interest rate on Wednesday.
Trade patterns created significant volatility in quarterly GDP calculations. While exports grew during the period, imports expanded at a faster pace. Economists noted that tariff-related trade swings have become a source of quarter-to-quarter unpredictability, potentially alternating between supporting and hindering growth depending on prevailing trade dynamics.
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