U.S. Economy’s Sluggish Growth Amid High Imports and Inflation Pressures

The U.S. economy grew at a slow pace of 1.5% from April to June. Rising imports affected growth, yet consumer spending remained strong. The Federal Reserve’s preferred inflation measure grew slowly in the last month but stayed above the 2% target. This occurs as Americans express frustration over living costs ahead of the midterm elections. The country’s GDP, which measures goods and services output, slowed from the 2.1% rate in early 2026. This fell short of economists’ forecasts. Consumer spending, accounting for 70% of economic activity, rose by 3.2% annually, a notable increase from 0.5% earlier in the year.

Core economic strength, excluding fluctuating government spending and trade figures, indicated a 3.9% annual growth, up from 1.7% earlier. Business investments, excluding housing, increased by 8.4%, reflecting a significant focus on artificial intelligence. However, this was slightly down from 10.6% at the year’s beginning. Imports, which do not factor into GDP as they reflect goods not made domestically, rose by 11.5%. This rise was driven by increased shipments of computer chips and products supporting AI investments. These imports reduced GDP growth by 1.5 percentage points in the second quarter.

Olu Sonola from Fitch Ratings commented, “The consumer rescued the quarter.” He noted that AI investments drive growth, but the import surge linked to AI might not translate into equivalent U.S. GDP boosts. The Commerce Department highlighted that its personal consumption expenditures (PCE) price index rose 3.7% last month, down from a 4.1% increase in May. Excluding food and energy, core consumer prices rose by 3.3%, showing little change from May’s 3.4%. There was a 0.1% price reduction from May to June, partly due to a 9.2% drop in gasoline and energy.

While PCE figures met expectations, inflation has exceeded the Fed’s target for over five years. Some Fed officials express impatience with the slow progress. Recently, the Fed maintained its interest rate for the fifth meeting in a row, despite dissent from three regional presidents who favored a rate hike. The U.S. economy shows resilience amid the Iran war and related energy price spikes. The job market rebounded, with employers averaging 92,000 new jobs monthly this year, recovering from below 10,000 in 2025.

Higher costs trouble Americans as the November midterms approach, determining Republican control of Congress under President Trump. An AP-NORC poll highlights increasing public concern over the Iran war. Most adults, 72%, deem it crucial to curb rising domestic oil and gas prices, an increase from 67% in March.