US Economy Slumps to 1.5% Growth Rate in Second Quarter

The US economy grew at a sluggish pace of 1.5% from April to June, according to the Commerce Department's latest report. This growth rate is down from 2.1% in the previous quarter and below economists' expectations.

Consumer spending, which accounts for about 70% of the US economic activity, increased at a 3.2% annual clip, up from 0.5% in the January-March period. Business investment, excluding housing, rose at an 8.4% pace, down from 10.6% in the previous quarter but strong, reflecting a surge in investment in artificial intelligence.

The imports of computer chips and other products that support AI investment surged, partly contributing to the slowing growth rate. The imports shaved 1.5 percentage points off second-quarter GDP growth. However, the underlying strength of the economy, as measured by the GDP excluding volatile government spending and trade numbers, looked good, expanding at a 3.9% annual pace.

The Federal Reserve's favored measure of inflation grew more slowly last month but remained above its 2% target. The PCE price index rose 3.7% last month from June 2025, down from a 4.1% year-over-year increase in May. Excluding volatile food and energy prices, core consumer prices were up 3.3% from a year earlier.