The U.S. economy grew more than expected in the second quarter, with a 3.0% annualized rate, but it was largely due to declining imports. Consumer spending increased moderately, while business investment slowed and residential investment contracted. Economists predict tepid growth for the rest of the year due to trade uncertainties.

Despite the rebound, economists forecast a lackluster second half, limiting growth to about 1.5% for the year. The Federal Reserve left its benchmark interest rate unchanged, citing elevated economic uncertainty. Most economists expect the Fed to resume policy easing in September, after three rate cuts in 2024.

Consumer spending increased at a 1.4% pace, driven by pre-emptive buying ahead of import duties. Spending on healthcare and hospitality also rose. However, slowing wage growth and higher prices from tariffs could dampen spending. Low-income households, disproportionately affected, would be hardest hit by tariffs.

Business spending on equipment grew at a slower rate, while residential investment declined. Federal government spending also fell, likely to continue due to budget cuts. Final sales to private domestic purchasers, a key indicator of economic growth, grew at the slowest rate since 2022, signaling a weakening economy.

Read more at Yahoo Finance: Rebound in US economic growth in second quarter masks underlying slowing trend