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US economy slows, yet Americans still spending in face of inflation
apnews.com • • general
Key Points:
- The U.S. economy grew at a slow 1.5% annual rate in Q2 2026, down from 2.1% in Q1, with rising imports reducing GDP growth by 1.5 percentage points despite strong consumer spending.
- Consumer spending increased sharply by 3.2% annualized, supporting economic activity, while business investment, particularly in artificial intelligence, remained robust at an 8.4% pace.
- The Federal Reserve's preferred inflation measure, the PCE price index, rose 3.7% year-over-year in June, down from 4.1% in May, but core inflation remained elevated above the Fed’s 2% target for over five years.
- The Fed held interest rates steady for the fifth consecutive meeting, though three regional Fed presidents dissented, advocating for rate hikes to address persistent inflation.
- Despite geopolitical tensions and energy price spikes, the U.S. job market has strengthened in 2026, with average monthly job gains of 92,000, boosting consumer spending ahead of the November midterm elections.
