The latest figures, released by the Bureau of Economic Analysis (BEA), show that the economy grew more slowly than the 2.1% forecast by economists surveyed by LSEG. The report offers an early snapshot of economic performance and will be revised later this year as additional data become available.
The second-quarter estimate follows annualized growth of roughly 2.1% in the first quarter of 2026. Taken together, the first two quarters indicate that the U.S. economy expanded by about 1.8% during the first half of the year. According to the Bureau of Economic Analysis, last year the economy grew at an annualized rate of 4.4% in the third quarter and 0.5% in the fourth quarter, contributing to overall growth of about 2.1% for 2025.
Consumer Spending, Investment and Exports Drove Growth
According to the Bureau of Economic Analysis, increases in consumer spending, investment and exports were the main contributors to the rise in real gross domestic product during the second quarter. Those gains were partly offset by a decline in government spending, while imports increased during the same period.
The increase in investment was primarily linked to higher spending on equipment and intellectual property products. Equipment investment rose across several categories, led by industrial, transportation and information processing equipment. Investment in intellectual property products was mainly driven by software as well as research and development tied to the ongoing buildout of artificial intelligence.
At the same time, those gains were partly offset by declines in private inventory investment, particularly in wholesale trade, and by lower investment in nonresidential manufacturing structures.
Domestic Private Demand Accelerated Despite Slower Headline Growth
One of the report’s notable indicators showed stronger domestic private demand. Real final sales to private domestic purchasers, which combine consumer spending and gross private fixed investment, increased by 3.9% during the second quarter after rising 1.7% in the first quarter.
According to Fox Business, this measure reflected stronger momentum in household spending and private investment despite the slower headline GDP growth rate.
The Bureau of Economic Analysis also confirmed that imports increased during the quarter, while government spending declined, both of which influenced the overall composition of economic growth.
Economists Point to Resilient Underlying Activity
Gregory Daco, chief economist at EY-Parthenon, said that “the main engines of activity were resilient and broadening consumer spending and surging business information processing equipment and intellectual property products investment linked to AI.”
He added that moderate consumer spending growth and AI-led business investment are expected to support real GDP growth into 2027. Daco also said that “the most immediate downside risk remains a prolonged escalation of the Middle East conflict that lifts inflation and long-term interest rates and pushes the Federal Reserve toward renewed policy tightening,” adding that such a scenario would weigh on consumer demand and private sector investment.
As reported by Fox Business, Michael Pearce, chief U.S. economist at Oxford Economics, said the “subdued 1.5% annualized rise in GDP in Q2 underplays the economy’s strength as it reflects a drag from rising imports and falling inventories that won’t be sustained for long.” He added that an inventory rebuilding cycle could help drive economic growth back above 2% during the second half of the year.
Pearce also said there was “little to change the Federal Reserve’s judgment that the economy and labor market remain resilient,” adding that the recent inflation data, which came in slightly weaker than expected in June, supported the decision to leave interest rates unchanged.
The Bureau of Economic Analysis said a revised estimate for second-quarter GDP will be released in late August, while the final revision is scheduled for the end of September.
