US Economy Growth Slows Amid High Inflation and Rising Imports

The US economy grew at a sluggish 1.5% pace in the second quarter of this year, a slower rate than expected, according to the Commerce Department's report on Thursday. This slowdown from 2.1% growth in the first three months of 2026 was largely due to increased imports, which subtracted 1.5 percentage points from GDP.

However, consumer spending remained strong, increasing at a 3.2% annual clip, up from 0.5% in the January-March period. Business investment, excluding housing, also rose at an 8.4% pace, down from 10.6% but still reflecting the surge in AI investment.

The Federal Reserve's favored measure of inflation, the personal consumption expenditures (PCE) price index, grew more slowly last month, rising 3.7% year-over-year, down from 4.1% in May. Core consumer prices were up 3.3%, little-changed from 3.4% increase in May.