US reports firm Q2 economic growth, inflation steady

The U.S. Bureau of Economic Analysis reported stronger-than-expected second-quarter GDP growth of 2.2%, up from the previously estimated 2.0%. The drivers of this growth were consumer spending, investment, and exports. Imports, which are subtracted in GDP calculations, also increased. The upward revision in GDP growth comes as a boost for President Donald Trump as his party prepares for midterm elections in November.

Much of the revision can be attributed to sectors benefiting from the Artificial Intelligence (AI) technology boom. The bureau also revised upward its estimate for first-quarter GDP growth to 2.5%, driven by higher consumer spending and services exports. Inflation remained steady, with the Federal Reserve's preferred inflation gauge at 3.4% year-on-year in August.

This is unchanged from July after a revision to July data. The Personal Consumption Expenditures (PCE) price index, which the Fed targets, came in at 3% year-over-year, with core PCE inflation at 3% after stripping out volatile energy and food prices. Despite years of high prices since the pandemic, the Fed has missed its long-term two-percent inflation target since early 2021.

The U.S. labour market has been stable, with private sector hiring rebounding strongly in September, with job growth at 90,000, up from 38,000 the previous month. This positive employment news adds to the favorable economic outlook for the upcoming elections.