Trump Takes A Nasty Hit

The U.S. economy expanded at an annualized rate of 1.5 percent during the second quarter of the year, according to new figures released Thursday, reflecting a period marked by the conflict in the Middle East and higher energy prices.

The growth rate came in slightly below economists’ expectations of 1.8 percent. It follows annualized growth of 2.1 percent during the first quarter and 0.5 percent growth during the final three months of 2025.

While overall GDP growth slowed, a key measure of underlying domestic demand remained much stronger. Real final sales to domestic purchasers, which excludes fluctuations from trade and inventories, increased at a 3.9 percent annualized rate after rising 1.7 percent in the previous quarter.

Consumer spending, which accounts for roughly two-thirds of the U.S. economy, rebounded sharply, rising at a 3.2 percent annualized pace compared with just 0.5 percent in the first quarter.

Business investment also remained strong, increasing 8.4 percent on an annualized basis, driven by continued spending on equipment and artificial intelligence-related infrastructure, including technology and intellectual property.

Trade weighed on overall economic growth during the quarter, with imports subtracting more than one percentage point from GDP. Businesses also reduced inventories, further limiting headline growth.

Federal Reserve Chairman Kevin Warsh said Wednesday that the U.S. economy has shown “impressive resilience” despite recent global disruptions, pointing to strong business investment as one of the economy’s brightest spots.

The combination of steady economic growth and inflation that remains above the Federal Reserve’s target led policymakers to leave interest rates unchanged this week, although three Fed officials favored raising rates further.

Separate data released Thursday showed the Fed’s preferred inflation measure eased in June as energy prices temporarily declined during a brief pause in fighting in the Middle East. However, oil prices have since moved higher as tensions in the region intensified again.

The Personal Consumption Expenditures (PCE) price index declined 0.1 percent for the month but remained 3.7 percent higher than a year earlier. Core PCE, which excludes food and energy prices, increased 0.1 percent during the month and was up 3.3 percent from the previous year.

The report also showed that both personal income growth and consumer spending slowed compared with the previous month, suggesting households remain cautious despite continued economic expansion.