The U.S. real gross domestic product grew at an annualized rate of 1.5% during the second quarter of 2024 [1].
This deceleration indicates a cooling economy that fell short of market expectations. The gap between actual growth and projections may influence future decisions by the Federal Reserve regarding interest rates and monetary policy.
The Bureau of Economic Analysis said the 1.5% growth rate [1], which missed the consensus expectation of 2.3% annualized growth [3]. This slowdown is attributed to a decline in federal government spending and an increase in imports [5].
Inflation data released alongside the growth figures shows that the core Personal Consumption Expenditures (PCE) price index remained elevated. The annual core inflation rate for June was 3.3% [2], a figure that stays above the Federal Reserve's long-term target of 2% [2].
Monthly data for June provides a more granular look at price movements. The core PCE saw a month-over-month increase of 0.1% [4]. Conversely, the headline PCE experienced a slight month-over-month decline of 0.1% [4].
The combination of slower economic expansion and persistent core inflation creates a complex environment for policymakers. While headline inflation showed a minor monthly dip, the annual core rate suggests that underlying price pressures have not yet fully subsided [2].
“The U.S. real gross domestic product grew at an annualized rate of 1.5% during the second quarter of 2024”
The divergence between slowing GDP growth and sticky core inflation presents a challenge for the Federal Reserve. If the economy continues to cool while inflation remains above the 2% target, the central bank faces a difficult balancing act between supporting growth and curbing price increases.
