U.S. GDP growth slows to 1.5% annual rate in second quarter

GDP (Q2 2026 Advance Estimate): Real GDP increased at an annual rate of 1.5% in the second quarter of 2026, down from a 2.1% rise in the first quarter and below consensus expectations. The deceleration in GDP during the second quarter reflected a downturn in government spending and reductions in investments and exports, which were offset partially by a rise in consumer spending. Since, by definition, GDP measures domestic output, imports are subtracted from the final calculation since they are reflected in other parts of the equation, such as inventories and consumption.

Consumer spending grew at an annual rate of 3.2%, up from a 0.5% increase in the first quarter, with both spending on goods (up 5.2%) and services (up 2.2%) contributing to the gain. Consumer spending on durable goods jumped 6.8%, while spending on nondurable goods moved up 4.4%. The rise in nondurable goods consumer spending was driven by an increase in spending on other nondurable goods. Meanwhile, for consumer spending on durable goods, increases in motor vehicles and parts, furnishing and recreational goods and vehicles led the gain. Within services, spending on health care, food services and accommodations, and financial services and insurance more than offset slower spending on housing and utilities services.

Investment grew 3.0% at an annual rate in the second quarter, after climbing 7.9% in the first quarter. The rise was driven by equipment investments increasing 15.2%, but down from 15.8% in the first quarter. Meanwhile, business spending on structures declined 5.0%, down from a decrease of 4.7% in the first quarter. Exports rose 4.5% in the second quarter as goods exports advanced 8.9%. At the same time, imports jumped 11.5% in the second quarter as goods imports rose 14.7%. The decline in government spending was driven by a 12.9% decrease in nondefense spending. Meanwhile, state and local government spending increased 1.1% in the second quarter, down from the 1.6% rise in the prior quarter.