(Kitco News) – The U.S. economy ended the first half of 2026 on weaker footing, as economic activity was significantly lower than expected, while inflation remained stubbornly elevated
The U.S. Bureau of Economic Analysis (BEA) announced on Thursday that the advance reading of second-quarter Gross Domestic Product (GDP) showed that the economy expanded by 1.5%, following a 2.1% increase in the first quarter.
The data was significantly lower than expectations, as economists were projecting another increase of 2.1%.
“Compared to the first quarter, the deceleration in real GDP in the second quarter reflected a downturn in government spending and decelerations in investment and exports that were partly offset by an acceleration in consumer spending. Imports increased more in the second quarter than in the first quarter,” the report said.
The report also noted that inflation shot higher in the second quarter. The advance GDP Price Index rose 6.3% in Q2, following a 3.6% increase in the first quarter. Economists were expecting to see another 3.6% increase in Q2.
Providing a more nuanced look at inflation, the BEA also released Personal Consumption Expenditures (PCE) data for June, including the core PCE index, which excludes volatile food and energy prices and is the Federal Reserve’s preferred inflation gauge.
The report said the core PCE index increased 0.1% in June, lower than the 0.3% increase in May, and below the 0.2% consensus forecast of economists.
Chris Zaccarelli, Chief Investment Officer for Northlight Asset Management, said the report contained both good and bad news for the Fed.
"The weaker than expected GDP numbers this morning could be cause for concern that the economy is slowing too quickly," he said. "On the other hand, the lower PCE readings should give the Fed some more room to be patient and not raise interest rates prematurely."
"As we head into the fall, within a mid-term election year, there is typically volatility and so we would be cautious for the next couple of months, given the headwinds of supply disruptions, slowing economic growth and election uncertainties."
Gold prices saw a muted reaction to the GDP and PCE data. Spot gold last traded at $4,073.78 an ounce for a gain of 0.21% on the day.
