The latest Commerce Department report shows that, despite underlying strength, economic growth in the second quarter was weaker than expected.
Meanwhile, June’s inflation remained significantly above the Federal Reserve’s target, complicating the central bank’s policy decisions.
According to seasonally and inflation-adjusted data from the Bureau of Economic Analysis, the gross domestic product, which measures goods and services, grew only 1.5% in the April-to-June quarter. Economists had predicted a growth rate of 1.8%, down from the 2.1% seen in the first quarter.
A separate report showed that the personal consumption expenditures price index, the Federal Reserve’s main forecasting tool, fell by 0.1%—in line with expectations—on a seasonally adjusted basis for the month, leading to an annual inflation rate of 3.7%.
Excluding food and energy, core PCE rose by 0.1% monthly and 3.3% yearly, matching forecasted 0.2% and 3.3%.
Regarding the inflation readings, the figures remained well above the Fed’s 2% target.
Energy goods and services prices fell by 5.9% in June, aided by a temporary easing of Middle East conflicts that caused gasoline to drop 9.2%. Housing inflation also slowed, increasing only 0.2%. Overall, goods prices declined by 0.6%, while service prices rose just 0.1%.
On a quarterly basis, the PCE index increased by 5.1% for the headline and 3.4% for the core.
The reports follow a split Fed vote of 9-3 to keep its benchmark borrowing rate at 3.5%-3.75%, where it has remained throughout the year.
Following the report, stock market futures increased, and Treasury yields jumped.
By CEO NA Editorial Staff
