The US economy grows at 1.5% annual pace in the second quarter of 2026, as a surge in imports weighed on overall growth even though consumer spending remained resilient, the Commerce Department reported Thursday. The figure, which measures growth in U.S. gross domestic product between April and June, came in below economists’ expectations and marked a slowdown from the 2.1% growth rate recorded in the first three months of the year, according to AP News.
The report also showed that the Federal Reserve’s preferred inflation gauge cooled last month compared with previous readings. However, price growth remained above the central bank’s 2% target, adding to pressure on households already grappling with the high cost of living. The data arrives less than 100 days before the U.S. midterm elections, a period in which economic conditions are expected to weigh heavily on voter sentiment.
Despite the overall slowdown in GDP, consumer spending, which makes up about 70% of total U.S. economic activity, increased at a 3.2% annual rate in the second quarter, a sharp rise from just 0.5% growth in the January to March period, according to the Commerce Department. The rebound in household spending helped offset weaker contributions from trade and government activity.
AI Investment Supports Growth as US Economy Grows at 1.5%
A separate measure that strips out volatile government spending and trade figures, often used to gauge the economy’s underlying strength, showed a 3.9% annual expansion, up from 1.7% in the first quarter. This suggests that core private sector demand held up more strongly than the headline GDP figure indicates.
Business investment, excluding housing, also grew at a robust 8.4% annual pace in the second quarter. While that marked a slowdown from 10.6% growth in the prior quarter, officials pointed to continued strong investment in artificial intelligence infrastructure as a key driver of business spending.
Imports, which are subtracted from GDP calculations because the measure only accounts for domestic production, rose sharply at an 11.5% annual pace. According to the Commerce Department, the increase was driven in part by a surge in shipments of computer chips and other components supporting AI related investment. The jump in imports alone shaved 1.5 percentage points off second quarter GDP growth.
Olu Sonola, head of U.S. economics at Fitch Ratings, said consumer spending was central to preventing a sharper slowdown in the quarter. “The consumer rescued the quarter,” Sonola said, adding that while artificial intelligence investment “remains a powerful growth story,” the associated rise in imports needed to support that buildout serves as “a reminder that an AI boom does not automatically translate into an equally large boost to U.S. GDP.”
The combination of below target economic growth and inflation running above the Federal Reserve’s 2% goal presents a complex picture for policymakers. Rising import costs tied to tariffs have also been a factor for some U.S. companies; for instance, Shein reported a $99 million loss linked to Trump era tariffs affecting its U.S. sales, illustrating how trade policy continues to ripple across different sectors of the economy.
The GDP report is one of the most closely watched indicators of U.S. economic health, offering insight into the combined output of consumers, businesses and the government. Thursday’s data reflects an economy that, while not contracting, is growing more slowly than in the first quarter, even as certain sectors, particularly those tied to AI infrastructure, continue to expand at a rapid pace.
With midterm elections approaching, economic performance and the cost of living are likely to remain central themes in political debate. The US economy grows at 1.5% figure, the Commerce Department noted, is preliminary and subject to revision as more complete data becomes available in the coming months.
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