US GDP Growth Slows Sharply, Missing Forecasts as Inflation Also Cools

The US economy grew at a 1.5% annualized rate in the second quarter, falling well short of expectations of 2.1% growth and matching the previous quarter’s pace, according to the advance GDP estimate released Thursday.

A weaker GDP print typically signals softer consumer spending, business investment or trade activity, all factors markets watch closely when assessing the broader health of the economy.

Inflation Data Also Comes in Below Expectations

The Core PCE Price Index, the Federal Reserve’s preferred inflation gauge, rose just 0.1% month over month, falling short of the expected 0.2% and easing further from the previous month’s 0.3% increase. Cooler inflation readings generally reduce pressure on the Fed to maintain higher interest rates, reinforcing expectations that policymakers may have more room to ease monetary policy in the months ahead.

Market Reaction Favors Gold Over the Dollar

The combination of weaker growth and softer inflation is typically seen as negative for the US dollar, since it reduces the likelihood of higher interest rates supporting the currency. At the same time, this type of data tends to benefit gold, which often gains when real yields fall and expectations shift toward looser monetary policy.