U.S. economy expanded at sluggish 1.5% pace in second quarter, on par with earlier estimate

U.S. Economy expanded at sluggish 1.5%.

Key points

• News Eddie Pells, Associated Press, Eric Olson, Associated Press August 26, 2026.
• FILE – Shoppers stop their carts to observe big-screen televisions on display in a Costco warehouse Thursday, April 30, 2026, in Timnath, Colo.
• Employers unexpectedly cut 23, 000 jobs against the backdrop of strain from the Iran war, unemployment dips to 4.1%.
• The Commerce Department's report indicated that costs rose 3.7% in July compared with a year earlier, but the pace was the same as June.
• Johnson, Baucom hope to unseat heavily favored incumbent Kelly in Mississippi's 1st Congressional District.

U.S. Economy expanded at sluggish 1.5% pace in second quarter, on par with earlier estimate. By: Paul Wiseman, Associated Press – August 26, 2026.

FILE – Shoppers stop their carts to observe big-screen televisions on display in a Costco warehouse Thursday, April 30, 2026, in Timnath, Colo. (AP Photo/David Zalubowski, File).

For context, the Commerce Department documented Wednesday that expansion in gross domestic product – the nation's output of a goods and services – decelerated from a 2.1% pace from January through March.

WASHINGTON (AP) – The U.S. Economy grew at a sluggish 1.5% pace from April through June. But consumer spending stayed solid.

Expansion in gross domestic product – the nation's output of a goods and services – decelerated from a 2.1% pace from January through March, the Commerce Department noted Wednesday. The second-quarter expansion number was unchanged from the department's first estimate.

Still, consumer spending – which accounts for regarding 70% of U.S. Economic activity – climbed at a healthy 3.4% annual clip, up from 0.5% in the January-March period.

Notably, the reason for the lackluster expansion was imports. They are subtracted from expansion as GDP is only supposed to count domestic production. Imports rose at a 12.5% annual pace from April through June, partly due to a surge in shipments of computer chips and other products that backing artificial intelligence investment, and sliced 1.64 percentage points off second-quarter expansion.

Beyond the headline figures, the U.S. Economy has proven surprisingly resilient in the face of fighting with Iran and the spike in energy rates it caused. Business investment, excluding housing, rose at a 8.5% pace in the second quarter, reflecting the AI investment boom. And a measure of the economy's underlying strength – which strips out volatile administration spending and trade numbers – grew at a robust 4.2% rate, up from 1.7% in the first quarter.

Investment in housing rose, ticking up for the first time since the end of 2024. The housing market has been depressed by high mortgage rates.

Wednesday's report was the second of three Commerce Department looks at second-quarter GDP expansion. The third and final report is due Sept. 30.

Additionally on Wednesday, the U.S. Noted that an inflation measure closely watched by the Federal Reserve was unchanged last month in the latest sign that plenty of Americans are still struggling with higher costs.

Notably, the Commerce Department's report indicated that costs rose 3.7% in July compared with a year earlier, but the pace was the same as June. When it stood at 2.9%, inflation has worsened since the U.S. And Israel attacked Iran in late February. It's noticeably above the Fed's target of 2%.

Stubbornly high rates are shaping up to be a key problem in the midterm elections, now just 10 weeks away, particularly as the Iran war keeps gas rates high, President Donald Trump is threatening new tariffs on Canada and China, and spending on AI infrastructure has pushed up the cost of computers, gaming consoles, and semiconductors. Regarding the Author(s). Paul Wiseman, Associated Press. News Christopher Rugaber, Associated Press August 13, 2026. Wholesale cost inflation slowed last month as gas, food costs fall.

In practice, the Labor Department's producer cost index – which captures inflation before it reaches consumers – rose 4.7% in July from a year ago, down from a much larger 5.5% rise in June. More From This Author. Economy Paul Wiseman, Associated Press August 7, 2026.

U.S. Employers unexpectedly cut 23, 000 jobs against the backdrop of strain from the Iran war, unemployment dips to 4.1%. Economy Paul Wiseman, Associated Press July 30, 2026.

U.S. Economy grows at a sluggish 1.5% in second-quarter with inflation remaining stubbornly high. Economy Paul Wiseman, Associated Press July 30, 2026.

Fed leaves interest rate unchanged but with 3 dissents as Warsh praises 'good family fight'. News Cass Rutledge August 26, 2026.

Johnson, Baucom hope to unseat heavily favored incumbent Kelly in Mississippi's 1st Congressional District. News Christopher Rugaber, Associated Press August 12, 2026.

Inflation slows but rates remain elevated as Iran war and spending on AI push up costs.

U.S. Inflation slowed last month and a measure of underlying cost pressures additionally cooled, suggesting higher oil and gas rates from the Iran war are only having a limited impact on broader costs in the economy. Economy Matt Ott, Associated Press July 28, 2026.

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For now, U.S. Economy expanded at sluggish 1.5% pace in second quarter, on par remains the part of the story worth watching, and further updates are likely as more details are confirmed.