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US economy slows as inflation bites. Friday, July 31, 2026 12:05 am People work in May, at the Connect Housing Blocks factory in Columbus, Ohio. The American economy slowed in the second quarter of the year, expanding at an annual rate of 1.5 percent as the war with Iran upended prices, supply chains and energy markets. (Maddie McGarvey/The New York Times) By TALMON JOSEPH SMITH New York Times The U.S. economy slowed in the second quarter of the year, expanding at an annual rate of 1.5% as the war with Iran upended prices, supply chains and energy markets. Oil prices have receded from their peaks in the spring. But damage in the form of higher prices for gasoline and other petroleum-based products is still hitting households and businesses. Persistent inflation and uncertainty over the Federal Reserve's plans to contain it pushed up bond yields this week. ADVERTISING It amounts to an uncertain moment for the U.S. economy, which continues to show signs of strength even as it is battered by persistent inflation, a destabilizing war in the Middle East and the potential for higher borrowing costs that could suck some of the juice out of its engine. Growth over the past three months was lower than the 2.1% annual rate of growth in the first quarter. Growth in both personal income and consumer spending also slowed in June. Still, the gross domestic product report showed that overall consumption remained relatively healthy and business investment, especially related to the artificial intelligence boom, continued to plow forward. An underlying "core" measure of growth, which captures the sum of consumer spending and gross private investment, increased 3.9% in the second quarter, compared with 1.7% in the first quarter. "Underlying growth was strong," said Eric Wallerstein, a former adviser at the Federal Reserve and the chief macro strategist at the Clocktower Group, an asset management and advisory firm. Still, he added, "real incomes and spending have been trending lower." Because GDP is adjusted for inflation, rising costs dampened the growth reflected in the data released Thursday. This was the first estimate for the second quarter by the U.S. Bureau of Economic Analysis. Revisions, conducted by civil servants at the agency, can be substantial, especially during periods of price volatility. Data collected by Viresh Kanabar, a financial researcher, shows that business orders and expenditures are rising. Retail sales have also been strong for several months. But consumer purchases are also growing at a much softer pace when adjusted for inflation, Kanabar's data shows. Over the past six months, he notes, "real" inflation-adjusted income has also fallen overall, and at a rate not seen since the height of the inflation spike in 2022. GDP, in simplest terms, is an account of the exchange of goods and services in the economy. And GDP growth is a fluctuating mix of four factors: business investment, government expenditures, net exports and household consumption, which typically constitutes about 70% of the U.S. economy. Consumer spending and business investment are on solid footing, but a pullback in net government spending and an increase in imports dragged on momentum. "It's a chug-along economy until further notice," said Dan Alpert, a senior fellow in macroeconomics at Cornell Law and managing partner at Westwood Capital, a financial firm. Earlier this month, the Trump administration imposed tariffs of 10% to 12% on imports from more than 80 countries. Economists have criticized the president's global tariffs, and courts have struck many of them down. Economists do not expect the tariffs that remain in place to cause a downturn. But many do believe it will slow growth and raise prices. According to one estimate by Yale researchers, the tax duties are costing the average American family around $1,100 annually. Many business leaders have expressed confidence that the Iran conflict will stay contained, with limited harm to broader commercial activity. But the Strait of Hormuz, a key fuel bottleneck partially under Iran's control, is still not a reliable passage for global shippers. Market analysts have issued stark warnings that international oil inventories are quickly depleting. So the risk of widespread shortages could soon be rearing again. One partial saving grace has been that the domestic and global economies have become much less "energy intensive." The amount of energy burned to generate a dollar of growth has fallen by about a third since 2000 in the United States and Europe and by roughly 40% in China. But lower crude inventories could still lead to an inflationary surge in oil prices that halts growth. There is some evidence that the jump in energy prices has already bled into the rest of the economy. Grocery prices are expected to rise and airfares, which have surged, are not expected to retreat anytime soon. Separate monthly data released Thursday showed that the Federal Reserve's preferred gauge of inflation actually fell 0.1% in June. That reflects the cool-off in oil prices in June. On an annual basis, inflation is still up 3.7%, well above the central bank's long-run target of 2%. And inflation in the second quarter was especially high. The Federal Reserve held interest rates steady Wednesday. But three of the 12 members on the Fed's policymaking committee dissented, voting to raise rates, a signal that pressure to contain inflation is mounting. Kevin Warsh, the Fed's new chair, has made stern pledges to curtail inflation. But he, like his predecessor, will also be weighing how tightening monetary policy could harm growth and the jobs market. The labor market has stabilized this year, compared with 2025. The pace of payroll growth over the past three months has been uneven but averaged 111,000 jobs a month. That stabilization, some Fed observers say, gives Warsh and other Fed leaders room to raise rates without risking too much harm. Yields on long-term bonds have risen recently, as investors worry that continually elevated inflation will erode the future value of some assets. Investors have been hand-wringing about a potential AI bubble. But stock indexes are up this year, and corporate earnings continue to outperform expectations. According to FactSet, the S&P 500's net profit margins are on track to rise to 16% in the latest quarter, the highest level since FactSet started tracking the metric in 2009. Economists are asking, with a mix of wonderment and anxiety, how closely tied the AI boom and GDP growth could become. Where the future returns on all this AI spending will come from remains a key question, as large companies leverage debt and billions of dollars in cash flow to follow through on investment commitments. Search queries, business software applications and content streams on personal devices can seem to manifest with virtual effortlessness. But cloud computing and AI systems rely on a massive, energy-intensive infrastructure of chips, cables and cooling systems. And the growth of those underlying physical systems is central to the immense investment boom among businesses. Goldman Sachs estimates $765 billion in capital expenditures on artificial intelligence by the end of the year. Brian LeBlanc, an economist and managing director at PNC Bank, notes that business "cap-ex" averaged an impressive 10% growth in the first half of the year alone. Because of some statistical quirks, however, the AI build-out - which relies on many imported foreign components rather than domestic parts - is partially tempering measures of domestic growth too. "From a GDP math standpoint, a lot of the AI-related capital expenditure, which adds substantially to GDP, gets offset by the fact that we import most of what goes into the data centers," said Jake Oubina, a managing director and deputy head of economic research at Piper Sandler, an investment firm. Federal tax refunds, which bolstered households in spring, are now mostly exhausted. And with households' savings buffers much lower than in the recent past, "consumption will be much weaker through the rest of the year," Wallerstein said. "Yes, the AI boom is not 100% of GDP," he said. "But it is an AI-driven economy." (C) 2026 The New York Times Company

Fed Governor Lisa Cook opens Cleveland's Small Business Symposium. Federal Reserve Board Governor Lisa D. Cook delivered welcome remarks at the State of Small Business Symposium hosted by the Federal Reserve Bank of Cleveland on 24 June 2026. The Federal Reserve System's engagement with the grassroots of the American economy came into focus on 24 June 2026, when the Federal Reserve Bank of Cleveland hosted its State of Small Business Symposium - a gathering designed to examine the health, challenges, and evolving landscape of small enterprises that form the backbone of the United States economy. The event drew attention not only for its subject matter but for the participation of Lisa D. Cook, a sitting Member of the Board of Governors of the Federal Reserve System, who delivered the official welcome remarks via pre-recorded video. Cook's involvement at the level of opening remarks signals the degree to which the Federal Reserve's central leadership views small business conditions as a topic worthy of direct institutional attention, rather than one to be delegated entirely to regional branches. While the Cleveland Fed organized and hosted the symposium, having a Board Governor open proceedings - even through a pre-recorded format - underscores the event's standing within the broader Federal Reserve system's calendar of economic engagement activities. The Federal Reserve's regional listening infrastructure. The State of Small Business Symposium is representative of a broader institutional tradition within the Federal Reserve's regional bank network: structured forums through which policymakers gather qualitative and quantitative intelligence on economic conditions from outside the formal data pipelines of government statistics agencies. The Cleveland Fed, serving the Fourth Federal Reserve District - which spans Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia - occupies a strategically significant position for monitoring industrial, manufacturing, and service-sector small business trends in a region that reflects many of the economic cross-currents shaping the broader American heartland. Symposiums of this type serve a dual function. They allow regional Fed officials and invited economists to present research findings on small business finance, credit access, labor conditions, and sector-specific pressures. Simultaneously, they create a structured space for small business owners, community lenders, and local policymakers to surface on-the-ground realities that may not yet be fully visible in aggregate macroeconomic data. In a period when the Federal Reserve has been navigating complex decisions around interest rates and credit conditions, real-time intelligence from the small business sector carries heightened policy relevance. Governor Cook's role and significance. Lisa D. Cook's participation as the welcoming voice of the symposium carries weight beyond ceremonial formality. As a Member of the Board of Governors - one of the seven seats that constitute the Federal Reserve's central policymaking body - Cook participates directly in Federal Open Market Committee deliberations and votes on decisions that shape the interest rate environment within which every small business in America operates. Her academic background, which spans economics and international political economy, has informed a policy perspective attentive to distributional outcomes: who benefits from monetary policy decisions and who bears disproportionate adjustment costs. The choice to deliver remarks via pre-recorded video rather than in person reflects the logistical realities of a Board Governor's schedule, though it does not diminish the institutional signal. Federal Reserve Governors are headquartered in Washington, D.C., and their presence - physical or recorded - at regional events represents a deliberate allocation of visibility. The Cleveland Fed's decision to anchor its symposium with a Board Governor's welcome positions the event within the upper tier of regional Federal Reserve convening activity. Small Business conditions in the current economic context. The timing of the symposium is itself analytically significant. Small businesses across the United States have been operating in an environment shaped by elevated borrowing costs, evolving labor market dynamics, and persistent questions about demand sustainability across consumer-facing sectors. Community banks and credit unions - the primary lending counterparts to small enterprises - have themselves been navigating tighter net interest margins and shifting deposit behaviors, creating an environment in which small business credit access has become an increasingly studied policy variable. Regional Federal Reserve banks have historically served as important conveners precisely at such inflection points, gathering structured testimony and research that feeds into the broader policy deliberation process. The State of Small Business Symposium, hosted by the Cleveland Fed in June 2026, fits squarely within this tradition, bringing together stakeholders at a moment when the Federal Reserve's posture on rates and credit conditions has direct and immediate consequences for small enterprise viability. What this means. The Federal Reserve Board of Governors' visible association with the Cleveland Fed's small business forum - through Governor Cook's welcome remarks - reinforces an institutional message: monetary policy deliberation is not conducted in abstraction from the lived economic experience of small businesses, their employees, and the communities they anchor. As policymakers continue to weigh incoming economic data against the risks of over-tightening or premature easing, forums like the State of Small Business Symposium represent an important channel through which the Federal Reserve system grounds its analysis in the commercial realities of Main Street. Governor Cook's participation, however brief its formal duration, affirms that channel's legitimacy and the Board's interest in what it surfaces. Elena rosato. Italian fintech analyst. Covers EU payment regulation and the Mediterranean banking sector. § Comments Open discussion no account needed

Wall Street closed sharply lower on Wednesday after the Federal Reserve held interest rates steady at 3.50%-3.75%. Three of 12 Federal Open Market Committee members dissented, preferring a rate hike. The S&P 500 fell 1.52% to 7,316.15 points, whilst the Nasdaq declined 1.74% to 24,442.94 points. The Dow Jones Industrial Average dropped 2.19% to 51,594.14 points. AI-related chip stocks extended recent losses on concerns about heavy capital spending. Meta Platforms fell 4% in extended trading after raising its 2026 capital expenditure forecast to between $130 billion and $145 billion. Microsoft rose 0.6% after hours, beating cloud revenue estimates. Ford Motor gained 2.1% after raising its annual profit outlook.