U.S. economic growth slowed more than expected in the second quarter while inflation in June remained well above the Federal Reserve's goal, the Commerce Department reported Thursday.
Gross domestic product, a broad measure of goods and services, increased just 1.5% for the April-through-June period, according to Bureau of Labor Statistics numbers adjusted for seasonality and inflation. Economists surveyed by Dow Jones had been looking for a growth rate of 1.8%, following the 2.1% increase in the first quarter.
A separate report showed the personal consumption expenditures price index, the Federal Reserve's primary inflation gauge, fell a seasonally adjusted 0.1% for the month, putting the annual inflation rate at 3.7%. The readings were in line with forecasts. Excluding food and energy, core PCE posted a monthly increase of 0.1% and an annual level of 3.3%, against respective forecasts for 0.2% and 3.3%. While the Fed technically uses the headline PCE number as its policy gauge, most officials consider core inflation a better indicator of longer-run trends.
Stock market futures were positive following the report while Treasury yields were sharply higher. The reports come a day after a divided Fed voted 9-3 to hold its benchmark borrowing rate in a range between 3.5%-3.75%, where it has been all year. The three dissenting votes came from regional presidents who have expressed concerns about higher prices and the failure to make progress on the inflation side of the central bank's mandate.
Breakdown of GDP Components
The GDP miss appeared to come from a decline in federal government spending and inventories, while other parts of the economy showed strength.
