A government report scheduled for Thursday is expected to detail the performance of the U.S. economy during the early months of the Iran war, a period marked by surging inflation. The data will cover gross domestic product (GDP) for the three months ending in June, following a significant global oil shock.
The national average price for a gallon of gasoline reached a high of $4.56 in May, according to AAA data, before a preliminary peace agreement last month offered some relief. Annual inflation has risen to 3.5%, surpassing the Federal Reserve's target rate of 2% by more than a percentage point.
Despite these challenges, the labor market has shown resilience, with hiring remaining stronger than many economists had predicted, even as businesses and consumers contend with elevated costs. Economists anticipate that GDP grew at an annualized pace of 1.8% in the second quarter, representing a modest decrease from the 2.1% growth recorded in the preceding three-month period. This projected figure would still indicate a stronger performance than the 0.5% annualized GDP registered in the final quarter of 2025.
In recent quarters, substantial investment in artificial intelligence has been a significant driver of national economic growth. JPMorgan Asset Management reported that AI spending accounted for approximately two-thirds of GDP growth in the first half of 2025, outpacing the contribution from millions of U.S. consumers. Major U.S. corporations have been investing heavily in the chips and data centers essential for AI operations. Observers will be watching Thursday's data release to see if this trend continued.
The combination of persistent inflation and a robust labor market has increased the likelihood of an interest rate hike, according to futures markets. Such an increase could risk slowing economic activity in the coming months by raising borrowing costs for corporations.
The Federal Reserve was scheduled to announce its latest interest rate decision on Wednesday afternoon, just hours before the GDP data release. The current benchmark rate is set between 3.5% and 3.75%. While this represents a decrease from its peak in 2023, borrowing costs remain significantly higher than the 0% rate established at the beginning of the COVID-19 pandemic.
Fed Chair Kevin Warsh, who assumed leadership of the central bank this summer, has stated his commitment to reducing inflation. "Persistently high prices are a burden for the American people," Warsh told reporters last month. "This committee will deliver price stability."