US Economic Growth Slows to 1.5% in Q2

The US economy expanded at an annualized rate of 1.5% in the second quarter of 2026, slowing from 2.1% in the previous quarter and matching the preliminary estimate. Personal consumption expenditures surged 3.4%, the strongest increase since Q3 2025, driven by a 4.3% rise in goods spending and a 3.1% increase in services. Fixed investment climbed 7.0%, led by an 8.5% jump in nonresidential investment, as spending on equipment and intellectual property products benefited from strong AI demand. Residential investment rose 1.3%, ending a five-quarter contraction. Government spending fell 1.0%, dragged by a 13.2% plunge in nondefense federal spending. Net exports also weighed on growth, as imports surged 12.5%, outpacing a 4.5% increase in exports.

The US economy expanded an annualized 1.5% in Q2 2026, below 2.1% in Q1 and forecasts of 2.1% the advance estimate from the BEA showed. Nonresidential fixed investment slowed (8.4% vs 10.6% in Q1). Investment in structures contracted for a tenth consecutive quarter (-5% vs -4.7%) and growth in intellectual property products also eased (8.8% vs 13.8%) while equipment investment remained robust (15.2% vs 15.8%). Meanwhile, residential investment rose 1.5%, marking its first increase in six quarters. Net trade exerted a larger drag (-1.01 pp vs -0.37 pp) due to a slowdown in export growth (4.5% vs 10.9%), while import growth remained strong (11.5% vs 11.8%). Government spending fell 0.8% (vs +4.4%) following sales of crude oil from the Strategic Petroleum Reserve. Private inventories subtracted 0.67 pp from GDP growth. In contrast, consumer spending accelerated (3.2% vs 0.5%), led by prescription drugs, new light trucks, furniture, food services and accommodation.

The US economy likely expanded at an annualized rate of 2.1% in Q2, matching the pace recorded in Q1 and signalling continued resilience despite the conflict in the Middle East, elevated gasoline prices, and the impact of tariffs. Consumer spending is expected to have remained robust, accelerating from the previous quarter as larger tax refunds and the FIFA World Cup provided additional support. Business spending on equipment likely posted another quarter of double-digit growth, driven by continued investment in AI-related technologies. However, investment in structures is expected to have remained weak, contracting for a tenth consecutive quarter, while residential investment likely declined for a sixth straight quarter. Meanwhile, net trade is expected to have weighed on overall growth, possibly subtracting more than one percentage point from GDP.