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By Paul WisemanWashington — The US economy expanded at a sluggish 1.5% pace in the three months to end-June as rising imports weighed on growth. Still, consumer spending rose and the Federal Reserve’s favoured measure of inflation grew more slowly last month but remained above the central bank’s 2% target.The commerce department reported on Thursday that growth GDP — the nation’s output of goods and services — slowed from 2.1% in the first three months of 2026, below economists’ expectations.The commerce department also said its personal consumption expenditures (PCE) price index, the one favoured by the Fed, rose by 3.7% last month from June 2025, but down from a 4.1% year on-year increase in May. Excluding volatile food and energy prices, so-called core consumer prices were up 3.3% from a year earlier, little changed from a 3.4% increase in May.The Fed on Wednesday chose to leave its benchmark interest rate unchanged for the fifth straight meeting. But three regional Fed presidents dissented, saying they wanted to raise rates to combat elevated inflation.Higher costs have frustrated Americans ahead of November’s midterm elections, which will determine whether President Donald Trump’s Republicans keep full control of CongressThe US economy has proved to be surprisingly resilient in the face of the Iran war and the spike in energy prices it caused. The job market has bounced back from a lacklustre 2025, giving consumers the wherewithal to spend. Employers are adding 92,000 jobs a month on average this year, compared to fewer than 10,000 a month in 2025 when high interest rates and President Donald Trump’s erratic use of tariffs discouraged businesses from hiring.Still, Americans remain frustrated about the high cost of living as inflation remains stubbornly above the Fed’s 2% target.Thursday’s GDP report was the first of three commerce department estimates of second-quarter economic growth.
