The U.S. economy expanded at a sluggish 1.5% pace from April through June as rising imports weighed on growth, yet consumers continued to spend. And the Federal Reserve’s favored measure of inflation grew more slowly last month. But it remained above the central bank’s 2% target at a time when Americans are frustrated about the high cost of living ahead of the midterm elections, now less than 100 days away.
Growth in U.S. gross domestic product—the nation’s output of goods and services—decelerated from 2.1% in the first three months of 2026, the Commerce Department reported Thursday, coming in below economists’ expectations. But consumer spending—which accounts for about 70% of U.S. economic activity—increased at a 3.2% annual clip, up from 0.5% in the January-March period.
A measure of the economy’s underlying strength, which strips out volatile government spending and trade numbers, looked good, expanding at a 3.9% annual pace, up from 1.7% from January through March.
Business investment, excluding housing, rose at an 8.4% pace, down from 10.6% from January through March but strong, reflecting a surge in investment in artificial intelligence.
Imports are subtracted from the economic figures because GDP is only supposed to count what is produced in the U.S. Imports rose at an 11.5% pace, partly on a surge in shipments of computer chips and other products that support AI investment. The imports shaved 1.5 percentage off second-quarter GDP growth.
“The consumer rescued the quarter,’’ said Olu Sonola, head of U.S. economics at Fitch Ratings. “AI investment remains a powerful growth story, but the import surge underpinning the build-out is a reminder that an AI boom does not automatically translate into an equally large boost to U.S. GDP.”
The Associated Press has the full story.
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