US Economic Growth Slows to 1.5% in Second Quarter as Inflation Persists Above Fed Target

The U.S. Commerce Department reported on July 30, 2026, that gross domestic product grew at an annual rate of 1.5% in the second quarter of 2026, covering April through June. This marked a deceleration from the 2.1% growth rate recorded in the first quarter of the year and came in below economists' expectations. Inflation remained above the Federal Reserve's 2% target during this period, contributing to unease among consumers and in financial markets. Multiple outlets reported that consumer spending remained resilient despite the overall slowdown, while rising imports weighed on growth. The Federal Reserve kept interest rates on hold during this period, and its preferred inflation measure grew more slowly in the most recent month, though it remained above the 2% target. Some reports linked part of the slowdown to surging energy costs tied to the war involving Iran, though this connection was not corroborated across all sources. Separately, China's economy grew 4.3% in the second quarter, its slowest pace since late 2022, with lagging consumer spending and business investment offsetting gains from strong exports linked to AI-related demand. The reports do not establish a clear consensus on the primary drivers of the U.S. slowdown, with some sources emphasizing energy costs from geopolitical conflict and others focusing on rising imports as the key factor weighing on growth. The timing of the report falls less than 100 days before the U.S. midterm elections, a context some outlets noted amid public frustration over living costs. No official policy response beyond the Fed's decision to hold interest rates steady has been confirmed, and further economic data releases are expected to clarify the trajectory of both inflation and growth in subsequent quarters.