The US Bureau of Economic Analysis (BLS) released its third and final reading of US gross domestic product growth yesterday. This reading showed the US economy grew at a faster pace than estimated in the first and second readings. At its most recent meeting, the US Federal Reserve Board (Fed) called US economic growth “solid.” A separate report from the BLS showed inflationary pressures in the US accelerated in May but did not deter US consumers from spending during the month. The data raised the possibility of the Fed raising interest rates sometime this year.

• The US economy grew at an annualized pace of 2.1% over the first quarter of 2026. This was higher than the second estimate of 1.6% growth. The economy grew by 0.5% in the fourth quarter of 2025.
• Inflationary pressures picked up in May. The personal consumption expenditure price index (PCE), which is the preferred inflation gauge for the Fed, rose by 4.1% year over year in May, which was the largest increase since April 2023.
• May’s increase was driven by an increase in energy prices, stemming from the conflict in the Middle East. The core annual PCE, which excludes food and energy, was up 3.4% in May.
• Personal spending rose by 0.7% in May. Stripping out the effects of inflation, spending rose by 0.3%, suggesting US consumers remain relatively resilient. US consumers were helped by a 0.7% increase in personal income, due in part to higher wages and salaries.

Economic conditions in the US appear to be relatively stable, aside from surging inflationary pressures. Consumers and businesses have brushed aside concerns about geopolitical and trade tensions. This could put the Fed on a path to raise interest rates this year to try to help contain elevated inflationary pressures. The Fed makes its next interest rate decision on July 29.

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