U.S. economy slows to 1.5%, but consumer spending and AI investment hold firm

The U.S. economy grew at a 1.5% annual rate in the second quarter, the Commerce Department said Thursday, slowing from 2.1% in the first three months of 2026. The Bureau of Economic Analysis released the advance estimate at 8:30 a.m. EDT as BEA 26-35, covering April, May and June, and the headline figure came in well below the roughly 2.5% pace economists had expected.

The biggest drag came from trade. Imports subtracted from growth after companies rushed to bring in goods earlier in the year, a pull-forward pattern tied to tariff uncertainty and supply-chain positioning. The BEA also released June personal income and outlays data the same morning, while June trade figures were scheduled for Aug. 4 and the second estimate for second-quarter GDP and corporate profits for Aug. 26.

Behind the weaker top line, domestic demand held up. Personal consumption, which makes up more than two-thirds of U.S. activity, kept expanding and helped cushion the blow from the wider trade deficit. Business spending on equipment and data centers tied to artificial intelligence also remained a bright spot, extending an investment surge that had already lifted first-quarter growth. June core capital goods orders rose, and shipments posted their largest gain in 4.5 years, reinforcing the view that AI infrastructure spending was still flowing through the broader economy.

That split between a softer GDP headline and firmer private demand is why economists have been looking past the topline number. The Federal Reserve Bank of Philadelphia’s second-quarter 2026 Survey of Professional Forecasters, published May 15, showed 33 forecasters expecting weaker growth later in the year even as they still projected 2.1% annualized growth for the quarter at that point. Investors have been trying to decide whether a slower pace would give the Federal Reserve room to cut rates, but strong consumer and capital spending make that call less straightforward.

The backdrop also remains complicated by tariffs, inflation and geopolitical strain. Tensions in the Middle East, including the Iran war, have fed into energy prices and supply chains, adding another layer of uncertainty for the second half of 2026. For now, the GDP report suggests the economy cooled, but not evenly, and not yet in a way that points to a broad retreat in spending or investment.