US Economy Grows 1.5% in Second Quarter

The U.S. Department of Commerce reported that the United States economy grew at an annualized rate of 1.5% from April through June. This represents a deceleration from the 2.1% growth pace recorded in the first quarter. The lower headline GDP growth was primarily driven by a 12.5% surge in imports, specifically computer chips for artificial intelligence, which reduced overall growth by 1.64 percentage points.

Despite the headline slowdown, underlying demand showed strength. Consumer spending increased at a 3.4% annual rate, and nonresidential fixed investment rose by 8.5%, fueled by an AI investment boom. Final sales to private domestic purchasers rose by 4.2%, the strongest performance in over three years. Conversely, government spending declined by 1% due to a drop in nondefense-related outlays.

Inflation remains a concern, with July inflation holding at 3.7% year-over-year, exceeding the Federal Reserve's 2% target. The core personal consumption expenditures price index was revised upward to 3.6%. Economic conditions continue to be pressured by energy price spikes linked to conflict with Iran and threats from President Donald Trump to impose new tariffs on Canada and China ahead of the midterm elections.