U.S. economic growth slowed to an annualized rate of 1.5% in the year’s second quarter even as inflation continues to rise.
Gross domestic product (GDP) in America increased 1.5% in the April through June quarter, slowing from an advance of 2.1% in the year’s first quarter.
Economists surveyed by Dow Jones Markets had expected the U.S. economy to expand by 1.8% in the spring quarter.
A separate report showed that inflation in America grew at a 3.7% annualized rate in June of this year, which is well ahead of the U.S. Federal Reserve’s 2% target.
Excluding volatile food and energy prices, core inflation in America rose at a 3.3% annual rate.
Slowing growth in an environment of rising inflation has raised fears of stagflation, an economic situation that hasn’t been seen in the U.S. since the late 1970s.
The latest economic data landed a day after the Federal Reserve chose to leave its benchmark interest rate at its current range of 3.50% to 3.75%.
The decision to hold interest rates at current levels was a controversial decision that sent the U.S. stock market plunging for its worst day in more than a year.
Both the economic slowdown and rise in inflation are largely being attributed to rising and volatile crude oil prices due to the war in Iran.
In recent weeks, crude oil prices have swung from below $70 U.S. a barrel to more than $100 U.S. During the second quarter, oil prices were above $110 U.S. per barrel.
Gross private domestic investments rose 0.5% in Q2 while U.S. exports increased a tepid 0.5% and imports declined 1.5%.
The latest data also showed that American consumers dipped into their savings to make ends meet, with the personal savings rate declining to 2.7% in Q2, the lowest level in four years.
The U.S. Federal Reserve next decides on interest rates Sept.16.
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