US Economy Grows at Sluggish 1.5% in Second Quarter as Inflation Cools

Economic growth cooled across the United States during the second quarter of 2026 as surging imports counterbalanced a resilient display of consumer spending. According to figures reported by the Commerce Department, gross domestic product expanded at an annual rate of 1.5% from April through June. That figure represents a deceleration from the 2.1% growth rate recorded in the first three months of the year, falling short of what economists had anticipated.

Consumer Spending Outpaces Drag From Imports

Despite the broader economic slowdown, American shoppers stepped up their purchasing. Consumer spending, which represents roughly 70% of all economic activity in the United States, climbed at a 3.2% annual clip during the second quarter. That marks a sharp acceleration from the modest 0.5% pace seen in the January–March period.

At the same time, business investment outside of housing expanded at an 8.4% pace. While down from 10.6% in the previous quarter, the figure remained robust due to a heavy influx of capital directed toward artificial intelligence infrastructure. However, that very same tech buildout created a counterweight in international trade figures.

Because gross domestic product measures strictly domestic production, imports are subtracted from national output calculations. Imports jumped at an 11.5% annual rate during the quarter, driven largely by incoming shipments of computer chips and related hardware necessary for artificial intelligence development. That trade surge shaved a full 1.5 percentage points off second-quarter economic growth.

“AI investment remains a powerful growth story, but the import surge underpinning the buildout is a reminder that an AI boom does not automatically translate into an equally large boost to U.S. GDP.”

Olu Sonola, head of U.S. economics at Fitch Ratings

Inflation Cools But Remains Above Federal Reserve Target

Price pressures showed signs of easing in June, though inflation remains a persistent political and economic challenge. The personal consumption expenditures price index—the inflation measure monitored most closely by the Federal Reserve—rose 3.7% in June compared with the same month in 2025. That reading marked a cooling from the 4.1% year-over-year increase recorded in May.

Core consumer prices, which strip out volatile food and energy items, increased 3.3% from a year earlier, holding relatively steady compared to a 3.4% rise in May. On a month-over-month basis, overall prices actually dipped 0.1% from May to June, driven primarily by a 9.2% decline in gasoline and other energy products.

Even with recent progress, the annual price increase has remained above the central bank’s stated 2% goal for more than five years. That stubbornness has fueled internal debate among central bankers. The Federal Reserve opted to leave its benchmark interest rate unchanged for the fifth meeting, though three regional Fed presidents dissented, arguing for higher borrowing costs to quash lingering price pressures.

Labor Market Resilience and Midterm Political Pressures

Underlying economic momentum has been supported by a rebound in hiring. Employers have added an average of 92,000 jobs per month this year, a sharp turnaround from 2025 when high interest rates and trade tariffs slowed corporate expansion. That employment growth has given consumers the financial footing required to maintain their spending habits despite higher living costs.

Economic realities are colliding directly with the political calendar as the nation approaches the November midterm elections. With less than 100 days until voters decide control of Congress, public frustration over elevated prices remains high. Voters are also adjusting to geopolitical headwinds, including the economic fallout from the Iran war and associated energy price spikes, though a recent AP-NORC poll indicates that roughly 72% of U.S. adults view preventing domestic oil and gas price surges as an extremely or very important priority.