US Economy Slows Down! Q2 GDP Grows Only 1.5%, Inflation Stuck at 3.3%

The US Department of Commerce announced on Thursday (30th) preliminary data showing that the US real GDP, adjusted for inflation, grew at an annual rate of 1.5% in the second quarter of 2024—lower than market expectations and indicating a further slowdown in economic growth. Although the rebound in consumer spending and strong business investment helped, they were not enough to fully offset the drag from declining net exports.

Consumer spending, which accounts for about two-thirds of US economic activity, grew at a rate of 3.2% in the second quarter, indicating that household demand remains solid. Businesses also continued to invest heavily, particularly in artificial intelligence (AI), where capital expenditures continued to grow rapidly amid the AI boom.

However, the decline in the more volatile net exports masked the resilience of domestic demand, resulting in weaker-than-expected overall GDP performance.

On the same day, data showed that the Federal Reserve's (Fed) preferred inflation gauge—the Personal Consumption Expenditures (PCE) price index—fell 0.1% month-on-month in June, driven by falling gasoline prices. The core PCE index, which excludes food and energy, rose 0.1% month-on-month, while the year-on-year rate remained at 3.3%, still significantly above the Fed's 2% inflation target.

With economic growth below expectations and core inflation remaining stubbornly high, the US economy faces simultaneous pressures of slowing growth and persistent price increases, making the Fed's future interest rate decisions more challenging.

Continuing updates...