US second-quarter GDP growth slows to 1.5% as trade deficit and fuel costs weigh on economy

The US economy grew at an annualised rate of 1.5% in the second quarter, according to a Commerce Department report released on Thursday. That was down from 2.1% in the first quarter, marking a clear slowdown in growth between April and June. The report points to a wider trade deficit and higher fuel costs as key pressures on activity.

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The Bureau of Economic Analysis said consumer spending rose 3.2% over the quarter, helped by tax refunds linked to President Donald Trump's One Big Beautiful Bill Act. At the same time, the average price of petrol climbed to $4.09 a gallon, up from $3.84 a month earlier, according to the American Automobile Association. The report also noted that tensions between the United States and Iran had helped push global fuel prices higher.

The data suggest the economy is still being supported by household spending and technology investment, even as those gains are offset by import-heavy demand and inflation pressures. Analysts cited the artificial intelligence investment boom as a factor behind growth, but one that also contributes to trade deficits because much of the spending relies on imported equipment. Rachel Ziemba, an adjunct senior fellow at the Center for a New American Security, said the economy continues to rely on technology investment.

The release matters because it comes alongside signs that inflation remains above the Federal Reserve's preferred pace. The Personal Consumption Expenditure Price Index rose 3.7% in June from a year earlier, after a 4.1% increase in May. That combination of slower growth and persistent price pressure complicates the outlook for policymakers, who are trying to balance support for the economy with efforts to contain inflation.

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The report also highlights how energy prices and trade flows are shaping the current expansion. Gasoline prices had briefly eased before rising again over the past month, adding to household costs. The latest figures also underline the growing role of data centres and artificial intelligence-related spending in US growth, even as questions remain about how durable that investment will be.

What remains unclear is how much of the second-quarter slowdown will carry into the third quarter, which will include July data. Economists will also be watching whether fuel prices continue to rise and whether consumer spending can hold up if inflation stays elevated. Further clues are expected from upcoming economic releases and from any change in the pace of technology investment.

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