WASHINGTON — U.S. economic growth slowed to an annualized rate of 1.5% in the second quarter of 2026 from 2.1% in the previous quarter, as a widening trade deficit and lower inventories weighed on headline output despite resilient consumer spending and business investment, according to advance data released by the Commerce Department.
The Bureau of Economic Analysis said the world's largest economy continued to expand between April and June, though at a slower pace than in the first three months of the year. The result was below the pace expected by many economists and reflected the impact of stronger imports, which subtract from gross domestic product calculations, as well as a decline in private inventories.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, accelerated to a 3.2% annualized rate after a weak first quarter, supported by household spending. Business investment also remained strong, with spending on equipment linked to artificial intelligence continuing to underpin capital expenditure, according to the BEA data.
A key measure of underlying economic strength, real final sales to private domestic purchasers, increased at a 3.9% annualized rate, suggesting domestic demand remained firm even as trade flows reduced overall GDP growth. Imports rose sharply during the quarter, reflecting strong demand for capital goods and other products, reducing the headline growth rate.
Inflation pressures, however, remained elevated. The personal consumption expenditures price index, the Federal Reserve's preferred inflation measure, continued to run above the U.S. central bank's 2% target, reinforcing policymakers' cautious approach to monetary policy.
The Federal Reserve last week left its benchmark interest rate unchanged, citing persistent inflation while acknowledging continued economic expansion. Financial markets have been closely monitoring incoming data for signals on the outlook for interest rates and growth.
Economists noted that the weaker headline GDP figure masked stronger underlying demand, arguing that robust household spending and continued investment in AI-related infrastructure pointed to resilience in the private sector even as trade dynamics distorted overall output.
The Commerce Department's report was the advance estimate for second-quarter gross domestic product and may be revised as additional data become available. The Bureau of Economic Analysis is scheduled to publish updated estimates later this month as more complete information on trade, inventories and other components is incorporated.
