The U.S. economy grew at an annual rate of 1.5 percent in the second quarter of 2026, falling short of what economists had expected and slowing from the 2.1 percent pace recorded in the first quarter. The figures came from an advance estimate released Thursday by the U.S. Bureau of Economic Analysis.
Economists surveyed by Dow Jones had projected growth of 1.8 percent for the April-through-June period, according to CNBC. The shortfall was driven largely by a drop in federal government spending and a decline in inventories, not by weakness in the parts of the economy that most directly reflect household and business activity.
Consumer spending rose 2.1 percent in the second quarter, a sharp improvement from the 0.4 percent gain in the first quarter. A measure of underlying demand called real final sales to private domestic purchasers increased 3.9 percent, compared with 1.7 percent in the first quarter, according to the BEA. Gross private domestic investment rose 0.5 percent, and exports increased 0.5 percent. Imports, which subtract from GDP, declined 1.5 percent in CNBC's account of the data, though the BEA noted imports increased more in the second quarter than in the first.
Federal government spending fell 0.3 percent, and inventories declined 0.7 percent, both subtracting from the headline number.
On inflation, the personal consumption expenditures price index, which is the Federal Reserve's primary forecasting gauge, fell a seasonally adjusted 0.1 percent in June compared to the prior month. That put the annual rate at 3.7 percent. Excluding food and energy, the core PCE index rose 0.1 percent for the month and 3.3 percent from a year earlier, matching forecasts, CNBC reported. The BEA's separate GDP price data showed the PCE price index rose 5.1 percent in the second quarter, up from 4.6 percent in the first quarter.
The monthly drop in the headline PCE was driven largely by a 5.9 percent fall in energy goods and services prices in June. That decline followed a temporary easing of fighting in the Middle East. Inflation had been running lower heading into 2026 but accelerated after the U.S. and Israel attacked Iran in late February, setting off a surge in energy prices that Fed officials have warned could spread into the broader economy.
Personal income rose $54.9 billion, or 0.2 percent, in June, according to the BEA. Disposable personal income increased $48.3 billion, also 0.2 percent. Personal consumption expenditures rose $65.2 billion, or 0.3 percent. The personal saving rate stood at 2.7 percent in June. The increase in spending was led by services, which accounted for $58.2 billion of the $65.2 billion total rise in PCE.
The reports arrived one day after a divided Federal Reserve voted 9-3 to hold its benchmark borrowing rate in a range between 3.5 and 3.75 percent, where it has sat all year. The three dissenting votes came from regional bank presidents who have expressed concern about prices and the lack of progress toward the Fed's inflation mandate. Most policymakers consider core PCE a better guide to longer-run inflation trends than the headline figure. With core inflation still at 3.3 percent annually, the data does not clearly open the door to rate cuts.
Stock market futures rose following the reports while Treasury yields moved sharply higher. The BEA is scheduled to release the second estimate for second-quarter GDP, along with corporate profits data, on August 26, 2026.
