WASHINGTON (AP) – The U.S. economy expanded at a slower pace of 1.5% from April to June. increase in imports Despite the weight of growth, consumers continued to spend. And the Fed’s preferred measure of inflation grew even more slowly last month. But with less than 100 days until the midterm elections, it remains above the central bank’s 2% target, even as Americans complain about the high cost of living.
Growth in the U.S. gross domestic product, the country’s output of goods and services, slowed from 2.1% in the first three months of 2026, the Commerce Department said Thursday, slower than economists expected. However, personal consumption, which accounts for about 70% of economic activity in the United States, grew at an annual rate of 3.2%, up from 0.5% in the January-March period.
A good indicator of the economy’s strength after subtracting volatile government spending and trade data was positive, expanding at an annualized pace of 3.9%, up from 1.7% in the January-March period.
An employee checks a customer’s ID before checking for alcohol at the register at a grocery store on Monday, July 6, 2026, in Arlington Heights, Illinois. (AP Photo/Nam Y. Huh)
Business investment, excluding housing, grew at an 8.4% pace, down from 10.6% in the January-March period but steady, reflecting a surge in demand for housing. Investing in artificial intelligence.
GDP is supposed to count only what is produced in the United States, so imports are subtracted from the economic figures. Imports rose at an 11.5% pace, due in part to a surge in shipments of computer chips and other products that support AI investments. Imports pushed down GDP growth by 1.5% in the second quarter.
“Consumers saved the quarter,” said Ol Sonora, head of U.S. economics at Fitch Ratings. “Although AI investment remains a strong growth story, the import surge supporting its buildup was a reminder that the AI boom will not automatically boost U.S. GDP by the same magnitude.”
The Commerce Department said Thursday that the Federal Reserve’s preferred personal consumption expenditure (PCE) price index rose 3.7% last month from June 2025, slowing from a 4.1% year-over-year rise in May. So-called core consumer prices, which exclude volatile food and energy prices, rose 3.3% from a year earlier, little changed from May’s 3.4% rise. Prices actually fell by 0.1% from May to June, as prices for gasoline and other energy products fell by 9.2%.
Gas prices displayed at a Sinclair gas station on Interstate 70 in Golden, Colorado, Thursday, July 23, 2026. (AP Photo/David Zalubowski)
PCE prices were broadly in line with economists’ expectations. But year-on-year price increases have exceeded the Fed’s 2% target for more than five years, and some Fed officials are growing impatient for progress in combating inflation.
The Fed chose to keep its benchmark interest rate unchanged for the fifth consecutive meeting on Wednesday. However, three regional Fed presidents opposed the move, saying they wanted to raise interest rates to combat rising inflation.
The American economy has been surprisingly resilient in the face of war and war with Iran. Rising energy prices That’s what caused it. The job market has rebounded this year from a lackluster 2025, giving consumers more breathing room to spend. Employers are adding an average of 92,000 jobs a month this year, compared to less than 10,000 a month in 2025, when high interest rates and President Donald Trump’s erratic tariff policies hampered hiring.
Americans frustrated by high costs ahead of November midterm electionswhich will determine whether President Donald Trump’s Republican Party retains full control of Congress.
A new AP-NORC poll shows Public attitudes toward the Iran war are worsening. Also, about 7 in 10 U.S. adults (72%) say it is “very” or “extremely” important for the United States to prevent rising domestic oil and gas prices, up from 67% in March.
