The US economy expanded at an annualised rate of 1.5 per cent in the second quarter of 2026, slowing from 2.1 per cent in the previous quarter, while updated inflation readings showed continued price pressures, according to data released by the US Bureau of Economic Analysis (BEA). The second estimate of real gross domestic product (GDP) for the April-June quarter was unchanged from the advance estimate released in July. Growth was supported by increases in consumer spending, exports and investment, while lower government spending acted as a drag. Rising imports also weighed on the GDP calculation.
Consumer spending strengthens
The slowdown from the first quarter reflected weaker government expenditure and slower growth in investment and exports. These were partly offset by an acceleration in consumer spending, while imports increased at a faster pace than during the January-March quarter. Consumer spending, which accounts for a substantial portion of US economic activity, increased at an annual rate of 3.4 per cent in the second quarter, compared with 0.5 per cent in the first quarter. Imports jumped 12.5 per cent and subtracted about 1.64 percentage points from overall GDP growth.
The latest estimate included an upward revision to consumer expenditure, but its impact on overall GDP was offset by an upward revision to imports, leaving the headline 1.5 per cent growth rate unchanged. A measure of underlying domestic demand showed stronger momentum. Real final sales to private domestic purchasers — comprising consumer spending and gross private fixed investment — increased 4.2 per cent, revised upwards from the earlier estimate of 3.9 per cent.
Inflation readings rise
The GDP report also showed stronger price pressures during the quarter. The price index for gross domestic purchases increased 5.8 per cent, revised upwards by 0.1 percentage point from the previous estimate. The Personal Consumption Expenditures (PCE) price index rose at an annualised rate of 5.3 per cent during the quarter, compared with the earlier estimate of 5.1 per cent. Core PCE inflation, which excludes volatile food and energy prices, was revised to 3.6 per cent from 3.4 per cent.
The combination of slower headline economic growth and persistent inflation adds to the challenge facing the US Federal Reserve as it assesses the future course of monetary policy. Inflation remains above the central bank's 2 per cent objective, while the latest GDP figures indicate that overall economic growth has lost momentum compared with the beginning of the year. The BEA is scheduled to release its third estimate of second-quarter GDP in September, incorporating additional economic data.