The US economy grew at an annualised rate of just 1.5% in the second quarter of 2026, marking a slowdown from the previous period even as American consumers continued to splash out.
Thursday’s figure from the Bureau of Economic Analysis was down from the 2.1% growth rate in the first three months of the year and fell short of the 2% figure forecast in a Bloomberg poll of economists.
Growth was dragged down by lower government spending and slower growth in exports and business investment, the BEA said. But consumer spending rose sharply, suggesting the economy is in robust shape despite the fallout from President Donald Trump’s war with Iran.
“The second-quarter GDP figure seriously undersells a healthy economy,” said Bradley Saunders at Capital Economics. “The slowdown . . . will not sway the Fed’s view that the economy is ‘expanding at a solid pace’.”
The five month-long war in the Middle East has reverberated across the global economy, fuelling inflation as disruption to energy infrastructure pushes up prices at the pump. The BEA report came a day after markets were spooked by the Federal Reserve’s decision to hold interest rates steady, spurring concerns that the central bank would not be able to contain the war’s inflationary shock.
But despite the rising prices, the data showed US consumers continued to spend during the period, boosted by hefty tax refunds. Personal consumption expenditures rose at a rate of 2.1% during the quarter, up from 0.4 per cent previously. Treasury yields and the dollar fell slightly following the report, but the market reaction to the data was relatively muted.
