The U.S. economy grew at a 1.5% annual pace from April through June, a slower rate than the previous quarter and below economists' expectations, according to Commerce Department data. The slowdown was partly attributed to a significant increase in imports, which reduced the gross domestic product figure.

Despite the overall sluggish growth, consumer spending, a key driver of the U.S. economy, increased by 3.2% annually. This marks an acceleration from the 0.5% growth seen in the first quarter. Business investment, excluding housing, also showed strength, rising at an 8.4% pace, boosted by investments in artificial intelligence.

Imports increased at an 11.5% pace, with a notable surge in shipments of computer chips and other AI-related products. Because GDP measures domestic production, the rise in imports subtracted 1.5 percentage points from the second-quarter growth rate.

The Federal Reserve’s preferred inflation gauge, the personal consumption expenditures (PCE) price index, rose 3.7% last month from a year earlier. While this is a decrease from May's 4.1% year-over-year increase, it remains above the central bank's 2% target. Core consumer prices, excluding food and energy, were up 3.3% annually, showing little change from the previous month.

In response to persistent inflation, the Federal Reserve maintained its benchmark interest rate at its current level for the fifth consecutive meeting. However, three regional Fed presidents dissented, advocating for an increase to combat elevated inflation.

The economic landscape faces voters ahead of the November midterm elections, with inflation continuing to be a significant concern. The U.S. economy has shown resilience despite the impact of the Iran war and subsequent energy price spikes. The job market has improved this year, with employers adding an average of 92,000 jobs per month, compared to fewer than 10,000 per month in 2025. This has provided consumers with the means to spend.

This GDP report is the first of three estimates from the Commerce Department for the second quarter's economic performance.