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EsU.S. Growth Slows to 1.5% as Imports Surge; Inflation Eases
U.S. GDP grew at a 1.5% annual rate in Q2 2026, down from 2.1% in Q1, as imports rose. Consumer spending advanced 3.2%. The PCE index eased to 3.7% year over year, and the Fed kept rates unchanged.
The U.S. economy expanded at a 1.5% annual rate in the second quarter of 2026, slowing from 2.1% in the first quarter, the Commerce Department reported Thursday. Stronger household spending helped, but a jump in imports weighed on growth. The Federal Reserve’s preferred inflation gauge cooled to 3.7% in June from a year earlier.
Consumer spending, which accounts for about 70% of economic activity, increased at a 3.2% annual rate after a 0.5% pace in the prior quarter. A measure of underlying demand that excludes government and trade rose at a 3.9% rate, up from 1.7% in the first quarter.
Business investment outside housing increased at an 8.4% annual rate after a 10.6% rise in the first quarter, reflecting ongoing spending on artificial intelligence infrastructure. Imports climbed at an 11.5% rate, led by computer chips and other goods used in AI buildouts. Because GDP counts domestic production, those inflows reduced measured growth, subtracting 1.5 percentage points from the quarter’s result.
On prices, the personal consumption expenditures index rose 3.7% in June from a year earlier, easing from 4.1% in May. Core PCE, which excludes food and energy, increased 3.3% from a year ago. Month over month, overall prices slipped 0.1% following a 9.2% drop in gasoline and other energy prices.
The Federal Reserve kept its benchmark interest rate unchanged on Wednesday for the fifth straight meeting. Three regional Fed presidents favored an increase, and inflation has remained above the central bank’s 2% target for more than five years.
Hiring has picked up compared with last year. Employers have added an average of 92,000 jobs a month so far in 2026, after fewer than 10,000 a month in 2025 amid high borrowing costs and tariff uncertainty.
Energy costs remain a focus for households. A recent national poll found that 72% of U.S. adults consider it extremely or very important to prevent increases in domestic oil and gas prices, up from 67% in March. Views on the Iran war have grown more negative.
Midterm elections are less than 100 days away and will determine whether President Donald Trump’s party keeps control of Congress.
Olu Sonola, head of U.S. economics at Fitch Ratings, called it “The consumer rescued the quarter.” He noted that “AI investment remains a powerful growth story,” while pointing out that the related import surge limits how much of that activity shows up in U.S. GDP.
