US GDP Growth Slows in Second Quarter

A war in Iran. High gasoline prices. Elevated borrowing costs. The world’s largest economy has faced a series of challenges since late February. Despite the many risks, the United States keeps chugging along thanks to a resilient consumer and the artificial intelligence (AI) infrastructure buildout. These trends were observed in the second-quarter US GDP report released by the Bureau of Economic Analysis.

US GDP from April to June

The gross domestic product (GDP) represents the total value of all goods and services a country produces in a given period. Put simply, it is a snapshot of the entire economy.

In its initial estimate released on July 30 – there are three total estimates released over a three-month period – the US GDP grew 1.5% in the second quarter (April to June).

This was down from the 2.1% growth rate registered in the first quarter (January to March).

It also came in below economists’ forecasts of 1.8%.

Five factors generally support or hinder US GDP expansion: consumer spending, investment, government consumption, exports, and imports.

During the second quarter, consumer spending was the top factor, growing by more than 3%. This was followed by non-residential private sector investment (3%), fueled primarily by the continued AI boom. Shipments of US goods also jumped 4.5%.

Imports and government outlays dragged down the growth rate.

Imports, which are subtracted from gross domestic product calculations because they are produced outside of the United States, surged almost 12%. Government consumption expenditures also fell by nearly 1%.

The bureau’s quarterly report also included information about inflation pressures.

The GDP Price Index – a gauge of prices for all goods and services produced domestically – rocketed 6.3%, from 3.6% in the first three months of the year. This was also in line with market forecasts.

Additionally, the Personal Consumption Expenditures (PCE) Price Index for the quarter swelled 5.1% from 4.6%. Core PCE prices, which remove energy and food because of their volatility in the broader marketplace, slowed to 3.4%.

The Federal Reserve places more emphasis on PCE than on inflation data from the Consumer Price Index (CPI), another key measure. The PCE is a separate gauge that is updated more frequently and is more expansive. While the US central bank takes into account a wide range of data points, PCE and core PCE are the main gauges.

Looking ahead, US GDP could rebound in the current quarter, according to a widely watched forecasting model.

The Atlanta Federal Reserve’s GDPNow Model estimates third-quarter growth at 5%, driven by consumer spending, business investment, and changes in private inventories (how much firms add to or draw down their supply of goods over the quarter).

The New York Fed’s Staff Nowcast, an alternative GDP forecasting tool for economic observers, expects 2.8% in the current quarter.

Climbing Above 2%

Economists generally expect US GDP to grow around 2% for the rest of the year. Household balance sheets are doing well, capital investment remains enormous, and American companies keep shipping goods to the rest of the world. The threat will continue to be inflation, especially if the more than five-month Iranian conflict persists.

1. The US economy expanded 1.5% in the second quarter of 2026, falling short of the consensus forecast of 1.8%.
2. Consumer spending and business investment were the main drivers of growth during the April-June period.
3. Early forecasts suggest the US GDP growth rate will be as much as 5% during the third quarter, fueled again by consumer spending and business investment, as well as changes in private inventories.