In the United States, the economy showed signs of sluggish growth in the second quarter of 2026, expanding at a rate of 1.5% from April to June. This growth rate was a deceleration from the 2.1% recorded in the first quarter and fell short of economists' expectations. The Commerce Department's report highlighted that rising imports, particularly in sectors like artificial intelligence, negatively impacted the GDP figures. Despite this, consumer spending, which constitutes about 70% of economic activity, increased significantly at a 3.2% annual rate, a notable rise from just 0.5% in the previous quarter. Business investment also remained strong, although it showed a slight decline from the previous quarter's growth rate. Imports surged by 11.5%, primarily driven by increased shipments of computer chips and other products that support AI investment, which ultimately subtracted 1.5 percentage points from the GDP growth.
The Federal Reserve's preferred measure of inflation, the personal consumption expenditures (PCE) price index, rose by 3.7% in June compared to the previous year, a decrease from the 4.1% increase observed in May. Core consumer prices, excluding food and energy, remained relatively stable, showing a 3.3% increase year-over-year. The Fed decided to keep its benchmark interest rate unchanged for the fifth consecutive meeting, although some regional Fed presidents expressed dissent, advocating for a rate hike to address persistent inflation.
The economic landscape has been complicated by external factors, including the ongoing Iran war and the resulting spike in energy prices. Despite these challenges, the job market has shown resilience, with employers adding an average of 92,000 jobs per month in 2026, a significant improvement from the previous year's lackluster performance. This job growth has provided consumers with the financial means to increase their spending, contributing to the overall economic activity. However, the high cost of living continues to frustrate many Americans, especially as inflation remains above the Federal Reserve's target of 2%.
The GDP report released by the Commerce Department is the first of three estimates for second-quarter economic growth, indicating that further revisions may follow as more data becomes available. The upcoming midterm elections in November are also a critical factor, as they will determine whether President Donald Trump’s Republican Party retains control of Congress amidst growing economic concerns.
