The US economy grew at a weaker-than-expected pace in the second quarter despite a pickup in consumer spending and solid business investment.
Inflation-adjusted gross domestic product increased an annualized 1.5% in the period, according to an advance estimate issued Thursday by the Bureau of Economic Analysis.
A decline in net exports, which can be volatile from quarter to quarter, masked strength in underlying demand. Consumer spending, which comprises about two-thirds of economic activity, rose at a 3.2% rate. Business investment continued to boom amid a rush to invest in artificial intelligence.
Meanwhile, the Federal Reserve's preferred measure of inflation — the personal consumption expenditures price index — fell 0.1% last month from May on the back of lower gasoline prices. Excluding food and energy, it rose 0.1%.
The report highlights an economy that's so far powering through the fallout of the Iran war. While the conflict has pushed prices higher and weighed on sentiment, a slide in gasoline costs at the end of the quarter alongside higher-than-usual tax refunds and sales promotions helped support household spending.
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Separate data out Thursday showed inflation-adjusted consumer spending climbed a robust 0.4% in June, matching the strongest since July 2025.
The massive AI investment push is also playing a critical role. After the Fed decided to keep interest rates unchanged on Wednesday, Chairman Kevin Warsh described the economy's resilience as “impressive” but noted the “most striking” feature of the economy is the strength of business investment.
Business investment remained a key driver of growth in the second quarter. Big technology firms including Meta Platforms Inc. and Microsoft Corp. are aggressively building out data centers and investing in AI, despite investors' concerns about whether it will pay off.
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
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