US GDP growth stays at 1.5% in Q2, imports weigh on output
The US economy grew at a 1.5% annual rate in the second quarter, matching the initial estimate, as a surge in imports of computer chips and AI equipment trimmed growth. Consumer spending, which accounts for about 70% of activity, expanded at a healthy 3.4% pace. A measure of underlying demand rose 4.2%, while inflation remained elevated at 3.7% in July.
The second-quarter slowdown was driven almost entirely by a 12.5% surge in imports, which subtracted 1.64 percentage points from growth. Much of that import jump came from computer chips and equipment tied to artificial intelligence investment, while business investment excluding housing climbed 8.5% during the same period. Housing investment also ticked upward for the first time since late 2024, despite persistently high mortgage rates.
Inflation remains a central concern, with prices rising 3.7% in July year-over-year, unchanged from June and well above the Federal Reserve's 2% target. The rate has climbed from 2.9% since late February, when the U.S. and Israel attacked Iran. The Commerce Department will release its final second-quarter GDP revision on Sept. 30, with midterm elections now roughly ten weeks away.
This report may shape how voters assess the economy heading into the midterms, as households continue to face elevated costs for gas, computers, and semiconductors. Businesses investing in AI infrastructure could see continued growth, but proposed tariffs on Canada and China may raise prices further. Consumers, particularly those with tighter budgets, could feel squeezed between modest output growth and stubborn inflation, while policymakers weigh whether current conditions justify rate adjustments or trade interventions.