US economic growth slowed to an annual 1.5pc pace in the second quarter, as slower government spending and increased imports partly offset stronger consumer spending and investment.
Growth slowed from an annual 2.1pc in the first quarter and followed 0.5pc in the fourth quarter 2025, the Bureau of Economic Analysis (BEA) reported. Economists surveyed by Trading Economics had forecast growth of 2.1pc.
Consumer spending accelerated to a 3.2pc rate in the second quarter, possibly driven by large income tax refunds, following 0.5pc growth in the first quarter.
Spending on fixed investments — such as equipment, buildings and intellectual property — quickened to a 7pc annual rate, while investments on residential properties grew by an annual 1.5pc after falling by 7.8pc. Spending on equipment rose by 15.2pc, partly driven by the expansion of the artificial intelligence (AI) industry, following 15.8pc growth in the second quarter. The change in private inventories, including imported equipment and goods, showed a 0.7 percentage point drag on growth.
"Big drags from net trade and inventories obscure solid growth in private demand in Q2, but we doubt this strength will be sustained," Pantheon Macroeconomics said in a note. "The boost from tax refunds is fading fast, underlying income growth is very weak, (and) higher gas prices still are putting pressure on spending elsewhere."
Much of the recent AI-related spending is supporting technology imports, Pantheon said, rather than supporting the domestic economy.
Exports rose by 4.5pc after a 10.9pc gain in the prior quarter, while imports, which subtract from growth, rose by an annual 11.5pc in the second quarter, accounting for a 1.5 point drag on GDP growth, after an 11.8pc gain.
Federal government spending fell by 4.1pc after rising by 9.4pc, while defense spending rose by 2.4pc after a 2.1pc gain. State and local spending rose by 1.1pc.
