Real GDP growth slowed in the second quarter of 2026, as a pullback in government spending and slower growth in investment and exports, more than offset stronger consumer spending. Business investment continued to support growth, particularly through equipment and intellectual property products, while imports increased and remained a drag on headline GDP.
According to the “advance” estimate released by the Bureau of Economic Analysis (BEA), real gross domestic product (GDP) expanded at an annual rate of 1.5% in the second quarter, down from a 2.1% increase in the first quarter of 2026.
The latest GDP report also showed that inflationary pressures remained elevated. The price index for gross domestic purchases rose 5.7% in the second quarter, up from 3.6% in the first quarter. The Personal Consumption Expenditures (PCE) Price Index, which measures inflation (or deflation) across various consumer expenses and reflects changes in consumer behavior, increased 5.1%, compared with a 4.6% increase in the previous quarter. Excluding food and energy, the core PCE price index increased 3.4%, easing from 4.4% in the first quarter.
Breaking down the second-quarter data further, growth in real GDP primarily reflected gains in consumer spending, investment, and exports, which were partly offset by a decrease in government spending. Imports, which are a subtraction in the calculation of GDP, increased during the quarter.
Consumer spending, the backbone of the U.S. economy, accelerated in the second quarter, rising at an annual rate of 3.2% after a 0.5% increase in the first quarter. This acceleration helped offset weakness in other components of GDP and supported the broader measure of underlying private demand.
Real final sales to private domestic purchasers, the sum of consumer spending and gross private fixed investment, increased 3.9% in the second quarter, up from 1.7% in the first quarter. This measure suggests that private domestic demand strengthened even as headline GDP growth slowed.
Gross private domestic investment continued to expand in the second quarter, although at a slower pace than in the first quarter. Gains in equipment and intellectual property products supported business investment, while private inventories and some structures categories weighed on growth.
Nonresidential fixed investment increased 8.4% in the second quarter. Strong gains in equipment (+15.2%) and intellectual property products (+8.8%) offset a decrease in structures (-5.0%). Meanwhile, residential fixed investment (RFI) rose 1.5%, making its first positive contribution after five consecutive quarters of weakness. Within the residential category, investment in single-family permanent site structures rose 4.4% at an annual rate, multifamily permanent site structures declined 1.8%, and spending on improvements fell 5.0%.
Government spending declined 0.8% in the second quarter, reversing the prior quarter’s boost and contributing to the slowdown in overall economic growth.
Trade activity remained positive but less supportive of GDP growth. Exports continued to increase, although at a slower pace than in the first quarter, while imports accelerated. Because imports are subtracted from GDP, the increase in imports reduced second-quarter headline growth.
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