US economy grows sluggish 1.5% in second quarter as inflation tops Fed target

The U.S. economy experienced sluggish growth in the second quarter, expanding at a 1.5% annual rate from April to June. This deceleration from the first quarter's 2.1% growth fell below economists' forecasts, despite a rise in consumer spending.

Inflationary pressures continue to be a concern for Americans ahead of the midterm elections. The Federal Reserve's favored inflation gauge, the personal consumption expenditures (PCE) price index, saw a year-over-year increase of 3.7% last month, down from 4.1% in May but still exceeding the Fed's 2% target. Core consumer prices, excluding volatile food and energy costs, also remained elevated.

This persistent inflation has fueled frustration among consumers. The Federal Reserve recently opted to hold its benchmark interest rate steady for the fifth consecutive meeting, though some regional Fed presidents advocated for a rate hike to combat inflation. The economic landscape remains a key issue in the upcoming elections that will determine control of Congress.

Despite these headwinds, the U.S. economy has demonstrated surprising resilience, particularly the job market. Employers have been adding an average of 92,000 jobs per month this year, a significant increase compared to the previous year when high interest rates and trade policies had dampened business hiring. This stronger job growth provides consumers with the means to spend, even as the high cost of living remains a point of contention.