The U.S. economy expanded at 1.5% from April to June. This sluggish growth was influenced by a rise in imports, yet consumer spending remained strong. The Federal Reserve’s preferred inflation measure indicated slower growth last month, hovering above the central bank’s 2% target, a point of concern as midterm elections approach.
The Commerce Department reported a slowdown in GDP from 2.1% in the first quarter of 2026. Consumer spending, which makes up approximately 70% of U.S. economic activity, rose at a 3.2% annual rate, up from 0.5% in the earlier months of the year.
A measure of the economy’s core strength—excluding unstable government spending and trade—rose at a 3.9% annual pace. Business investment outside of housing grew at an 8.4% pace, a slight drop from 10.6% in the previous timeframe, driven by increased artificial intelligence investments.
“The consumer rescued the quarter,” said Olu Sonola, head of U.S. economics at Fitch Ratings.
Imports, which detract from GDP because they involve goods produced outside the U.S., increased by 11.5%. This rise was linked to a surge in imports of computer chips and related products supporting AI growth. As a result, imports reduced the second-quarter GDP growth by 1.5%.
The Commerce Department noted that its personal consumption expenditures (PCE) price index—preferred by the Fed—increased 3.7% last month from June 2025. This was a decrease from a 4.1% year-over-year rise in May. Excluding food and energy, core consumer prices rose 3.3% from the previous year. An observable fall in prices from May to June was due to a 9.2% drop in energy costs.
The job market has shown resilience, rebounding from a challenging 2025. On average, employers have been adding 92,000 jobs monthly this year compared to under 10,000 per month the previous year. This improvement comes despite the challenges posed by the Iran war and subsequent energy price hikes.
Higher costs are a concern for Americans as the midterm elections approach, affecting the control of Congress. An AP-NORC poll highlights increasing public frustration with the Iran conflict, with 72% of U.S. adults indicating the importance of preventing domestic oil and gas prices from climbing.