Economic Growth Slowed to 1.5% in the Second Quarter
The advance estimate showed the expansion downshifting from 2.1% in the first quarter, with government spending subtracting from growth and a startling jump in the price index for domestic purchases.
WASHINGTON — The U.S. economy grew at a 1.5% annual rate in the second quarter, the Bureau of Economic Analysis said Thursday, a slowdown from the 2.1% pace recorded in the first three months of the year and a weaker result than most forecasters expected.
Consumer spending, business investment and exports all contributed to growth. A decline in government outlays worked in the other direction, and imports — which are subtracted in the GDP calculation — increased.
The inflation line in the report
The number that drew the most attention was not the growth rate at all. The price index for gross domestic purchases, a broad measure of what American households, businesses and governments pay for goods and services, rose 5.7% in the quarter, up sharply from 3.6% in the first quarter.
That acceleration reflects the energy shock that swept through the economy in March and April, and it is a reminder of how much of this year's inflation has been imported through the oil market rather than generated by domestic demand.
Growth is narrower than it looks
Beneath the headline, the composition of growth has become unusually concentrated. Investment tied to artificial intelligence — data centers, servers, networking equipment and the electrical infrastructure to run them — has accounted for an outsized share of the expansion since late last year, at one point contributing roughly three-quarters of quarterly growth.
That spending is real, and it shows up in construction employment and semiconductor orders. But it employs relatively few people once a facility is running, which limits the wage-and-spending multiplier that traditionally spreads growth through the rest of the economy.
Where the quarter leaves the outlook
Three data points now sit uncomfortably together: growth of 1.5%, payrolls that fell in July, and inflation still above 3%. None of them individually signals a recession. Taken together, they describe an economy running below its potential with prices that have not fully normalized — the environment central bankers find hardest to navigate.
Revisions to the second-quarter figure are due later in the summer, and given how much of the estimate rests on incomplete trade and inventory data, the final number could look meaningfully different.
