US Economy Slows to 1.5% Growth in Q2 Amid Persistent Inflation

The US economy grew at a sluggish 1.5% pace in the second quarter of this year, according to a report from the Commerce Department. This is down from 2.1% in the previous quarter and below economists' expectations.

Consumer spending was a bright spot, increasing by 3.2% annually, up from 0.5% in the first three months of the year. Business investment also rose at an 8.4% pace, down from 10.6% but still strong, driven by a surge in artificial intelligence investments.

However, imports weighed on growth, rising at an 11.5% pace and shaving off 1.5 percentage points from GDP growth. The Commerce Department's personal consumption expenditures (PCE) price index, the Fed's preferred measure of inflation, rose 3.7% last month from June 2025, but remained above the central bank's 2% target.

Some Federal Reserve officials are getting impatient with progress against inflation, and three regional presidents dissented in the latest rate decision to raise rates and combat elevated inflation. The economy has been resilient despite external pressures such as the Iran war and energy price spikes, but Americans remain frustrated by high living costs ahead of the midterm elections.