The US economy turned in a disappointing performance in the second quarter, growing at an annualized rate of just 1.5% according to the Bureau of Economic Analysis advance estimate released on July 30. That’s a meaningful step down from Q1’s 2.1% pace and a clear miss against the economist consensus forecast, which had also called for 2.1%.

What dragged growth lower

Government spending declined, investment weakened, and exports lost momentum. Consumer spending partially offset those declines. Imports increased more sharply than in the prior quarter, and since imports subtract from GDP calculations, that added extra downward pressure on the headline figure.

Rising energy prices added another layer of complication. Higher costs at the pump and on utility bills eat into both consumer purchasing power and business margins.

The Fed’s impossible puzzle

Growth is slowing. Inflation concerns are persistent. These two facts point in opposite directions when it comes to interest rate policy. If the Fed focuses on the growth slowdown, it should consider easing. If it focuses on inflation, particularly the energy-driven variety, it should hold firm or even tighten.

When the entire forecasting community misses by 0.6 percentage points on GDP, it suggests the underlying data was sending misleading signals.

What this means for crypto and risk assets

Crypto markets haven’t shown a dramatic reaction to the GDP release yet. No major reporting has linked the GDP data to digital asset investments or specific tokens.

If the Fed interprets the slowdown as the bigger threat and signals potential rate cuts, that would typically be bullish for crypto. But if it decides that inflation, particularly energy-driven inflation, is the more pressing concern and maintains or tightens its current stance, risk assets could face headwinds.

The advance estimate is also just that: an advance estimate. The BEA will revise this figure twice more over the coming months.