- The United States' GDP for the second quarter of 2026, adjusted for seasonal variation, recorded an annualized quarter-on-quarter growth rate of 1.5%, primarily dragged down by government spending; during the same period, GDP grew by 2.1% year-on-year, indicating that overall demand remains quite resilient.
- The annualized quarter-on-quarter growth rate of private domestic final sales in the second quarter rebounded significantly to 3.9%, with personal consumption expenditure contributing 2.12 percentage points and non-residential fixed asset investment contributing 1.15 percentage points.
- In June, the core PCE price index in the United States grew by only 0.13% month-on-month and slowed to 3.3% year-on-year, below the inflation slowdown threshold set by Federal Reserve officials, significantly easing short-term interest rate hike pressures.
Macroeconomic Aggregate and Domestic Demand Momentum
The initial value of the United States' real GDP for the second quarter of 2026, adjusted for seasonal variation, slowed to an annualized quarter-on-quarter growth rate of 1.5%, below the previous market expectation of 2.1%. However, the annualized quarter-on-quarter growth rate of private domestic final sales, which measures true domestic demand, rebounded sharply to 3.9%, highlighting that the fundamentals of the U.S. private sector remain solid. This indicates that the market is reassessing the impact of policy expectation changes on sector valuations and trading sentiment.
Consumption, Investment, and Fiscal Drag
The slowdown in GDP growth in the second quarter is mainly attributed to the drag from government consumption expenditure and investment, with its contribution to GDP shifting from 0.74 percentage points in the previous quarter to -0.14 percentage points, primarily due to the accounting deduction of strategic petroleum reserve releases following the U.S.-Iran conflict. In contrast, personal consumption expenditure contributed 2.12 percentage points, and non-residential investment contributed 1.15 percentage points, with technology and industrial equipment investment showing a comprehensive expansion trend.
Core Inflation and Cooling Signals
The core PCE price index for June in the United States, announced on the same day, showed a year-on-year increase slowing to 3.3%, with the month-on-month growth rate significantly falling to 0.13%, well below the 0.2% interest rate hike warning line previously set by New York Fed President Williams. Service sector prices showed a broad cooling, and both the U.S. Treasury breakeven inflation rate and long-term inflation expectation indicators remained stable, indicating that energy price fluctuations have not triggered a secondary inflation spiral.
Monetary Policy and Interest Rate Outlook
With the rise in U.S. Treasury yields partially fulfilling the function of tightening financial conditions, the cooling of core inflation has provided the Federal Reserve (Fed) with more time to observe policy. Constrained by geopolitical games in the second half of the year and mid-term election pressures, the rigidity of inflation has significantly decreased, and market pricing generally expects that the Fed is likely to hold steady within the year, delaying further tightening policies.
