New reports out Wednesday showed that the U.S. economy grew more than previously thought in the second quarter of 2026 and that inflation remained firm in August.

The numbers

The Commerce Department revised up its reading for gross domestic product in the second quarter to 2.2%, well above the 1.5% that had previously been reported. The key consumer-spending and investment categories were both stronger than previously thought.

A key metric of underlying growth trends, real final sales to private domestic purchasers, was also tweaked higher, to 4.6%

Meanwhile, the inflation metric known as the personal-consumption expenditures price index rose by 3.4% over the past 12 months, the Commerce Department said in a separate report Wednesday, level from a month earlier.

In August alone, price increases accelerated. The overall index rose by 0.3%, and the core version that excludes food and energy prices rose by 0.2%, faster than the July readings.

That acceleration happened despite a tweak to the PCE inflation formula that many analysts believe, all else equal, would help to cool the index in recent months. To address mismeasurement concerns, the Bureau of Economic Analysis changed how three price categories are tabulated-legal services, investment services and computer software-and applied the change retroactively.

What it means

The PCE numbers don't come as a surprise to Wall Street analysts, because the index's formula draws on other government inflation data that were published earlier in the month. (This month's formula revision, however, added a bit more uncertainty than usual.)

But Fed officials have been frustrated to see progress stall on returning PCE inflation to 2%. The current round of price pressures, including tariffs, the Iran war and the artificial-intelligence investment boom, is just the latest in a series of inflationary impulses that has kept prices rising faster than the Fed's target for more than five years.

Early this summer, many officials had hoped the Fed could hold off on raising rates this year if price pressures began receding on their own. But the central bank's policy committee lost patience after seeing initial August inflation readings come in warmer than hoped earlier this month.

A strong consumer

Wednesday morning's data also brought evidence that American shoppers are still in sound financial shape. Consumer spending increased by 0.9%, a fast climb partly driven by more spending at gas stations as gasoline prices rose. Income growth cooled a bit to 0.2%, from 0.3% a month earlier.

More broadly, economic growth trends look better than previously thought.