The US economy expanded more slowly than expected in the second quarter, with an inflation surge that began in the early months of the Iran war weighing on activity, a government report showed on Thursday.

The economy grew at an annualised rate of 1.5% over the three months ending in June. That marked a slowdown from 2.1% growth in the previous quarter and came in below economists’ expectations.

Slower Growth after Earlier Momentum

Despite the cooling, the latest reading was stronger than the 0.5% annualised growth recorded in the final three months of 2025.

The report covered a period that followed a historic global oil shock triggered by the conflict in the Middle East. Gas prices and broader inflation pressures rose during the run-up to and during the initial stages of the Iran war.

The national average price for a gallon of gasoline reached as high as $4.56 in May, according to AAA data. The figure then eased somewhat after a preliminary peace agreement was reached last month.

Inflation Above Target, Hiring Still Solid

Annual inflation has risen to 3.5%, putting it more than a percentage point higher than the Federal Reserve’s 2% target. Even with prices elevated, hiring has remained more resilient than many economists feared, despite higher costs for businesses and consumers.

In recent quarters, the pace of economic growth has also been supported by investment in artificial intelligence. JPMorgan Asset Management said a surge in AI spending accounted for roughly two-thirds of gross domestic product growth over the first half of 2025.

The report noted that the boost from AI spending has outpaced the contribution from hundreds of millions of US consumers. It also said several of the country’s largest companies have directed funds into the chips and data centres needed to run AI systems.

Fed keeps Rates, Futures Hint at Possible Hike

The combination of higher inflation and a still-strong labour market has increased the likelihood of an interest-rate rise, futures markets indicated. Economists warned that a rate increase would raise the risk of weaker economic activity over the coming months, as companies could face higher borrowing costs.

The Federal Reserve said on Wednesday afternoon that it would keep interest rates steady, hours before the release of the GDP data. The benchmark policy rate is set at between 3.5% and 3.75%.

That range is down from a recent peak reached in 2023, but borrowing costs remain well above the near-zero level of 0% set at the start of the Covid-19 pandemic. Fed Chair Kevin Warsh, who took charge this summer, has said he intends to bring inflation down.

“Persistently high prices are a burden for the American people,” Warsh told reporters in Washington, D.C., last month. “This committee will deliver price stability.”

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31 July 2026

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Wait! What?

I thought the US economy was the hottest it’s been in history! What war? I knew there was a little excursion but a war? Inflation? I thought I had more money than I knew what to do with! I have a feeling there might be some fake news coming from somewhere, but I’m just too stupid to understand I guess.

Let's wait till november.

It's the economy stupid.

still waiting for my Doge check?

And to think that a lot of this was self-inflicted. Don just keep shooting himself in the foot he can't help it, I'm surprised he can walk at this point with all the bullet casings in his feet.

But the ridiculous tariffs and the incredibly stupid war of choice have damaged the US economy to a tremendous degree. Despite what the government goons say inflation is raging in America, and consumer confidence is at an all-time low, perhaps the lowest it's been since World War II.

Those golden Biden years of average GDP growth of 3.4-3.6% are gone. In place, Trump has cratered the economy with 1.5% annualised GDP which will not lower the unemployment rate of 4.2%. This represents roughly 7.1 million unemployed actively seeking work and another 1.3 million school leavers entering the job market. The Iran war shaved off roughly 0.6% from the US economic growth. This is Trump's war and he owned the blame for the sagging economy. Doubt he even care as long as his own coffer is full.

I had to chuckle the other day when I saw Trump at a rally state that he had lifted tariffs again on imported motor vehicles and the goons in the audience clapped when he said that, being too stupid to realise that the increase in tariffs directly affect those who buy the vehicles............

US Social Security is based on the inflation percentage usually in October of the previous year. Looks like a good increase for expats on SS if this holds steady. Yay! Too bad inflation in Thailand seems to be UP UP as the locals say.

Hedge fund billionaire Ray Dalio on Friday cautioned that the U.S.-Iran war has entered a decisive phase he thinks will determine a winner and loser in the conflict—and indicate if American global power holds into the future.

Oh oh. 😄

So no propaganda post from Illisdean/Boganjoe this time! 😂

A precision: 1.5% is the annualized Quarter growth, not the Year on Year growth, which is 2.1%.

The Gross Domestic Product (GDP) in the United States expanded 2.10 percent in the second quarter of 2026 over the same quarter of the previous year.

https://tradingeconomics.com/united-states/gdp-growth-annual#:~:text=The%20Gross%20Domestic%20Product%20(GDP,quarter%20of%20the%20previous%20year.