US GDP Growth Slows to 1.5% in Q2 as Prices Reaccelerate; Factory Construction Slips
The US economy expanded at a 1.5% seasonally adjusted annual rate in the second quarter of 2026, down from 2.1% in the first quarter, according to the advance estimate released Thursday, July 30, by the Bureau of Economic Analysis (BEA). At a quarterly rate, the increase was 0.4%. Current-dollar GDP rose 7.9%.
BEA said the increase in real GDP reflected gains in consumer spending, investment and exports that were partly offset by a decrease in government spending. Imports, which are subtracted in the calculation of GDP, increased. The step-down from Q1 reflected a downturn in government spending and decelerations in both investment and exports, partly offset by an acceleration in consumer spending, with imports rising more in Q2 than in Q1.
Real final sales to private domestic purchasers, the sum of consumer spending and gross private fixed investment, increased 3.9% in the second quarter, compared with an increase of 1.7% in the first quarter.
The price index for gross domestic purchases increased 5.7% in Q2, up from 3.6% in Q1. The personal consumption expenditures (PCE) price index rose 5.1%, versus 4.6% in the prior quarter. Excluding food and energy, the PCE price index increased 3.4%, down from 4.4%. In separate June data released the same day, personal income increased $54.9 billion, or 0.2% at a monthly rate; disposable personal income rose $48.3 billion, or 0.2%; and PCE increased $65.2 billion, or 0.3%.
BEA attributed the increase in investment primarily to equipment and intellectual property products, partly offset by decreases in private inventory investment and nonresidential structures. Within equipment, gains were widespread and led by industrial equipment, transportation equipment and information processing equipment, based primarily on Census Bureau-BEA international trade data and the Census Bureau Advance Economic Indicators Report for June.
The decrease in nonresidential structures was led by manufacturing structures, based on Census Bureau value-put-in-place data for April and May and a BEA projection for June. Separately, Dodge Construction Network reported a 62.9% month-over-month drop in manufacturing construction starts in June.
BEA said the largest contributor to the decrease in private inventory investment was wholesale trade, based primarily on Census Bureau inventory book value data.
On trade, exports rose on goods, led by petroleum and related products, partly offset by a decline in services. Imports increased primarily on goods, led by capital goods excluding automotive, mainly telecommunications equipment, semiconductors and related devices, and industrial equipment.
The government decline was led by federal nondefense consumption expenditures, which BEA said primarily reflected sales of crude oil from the Strategic Petroleum Reserve. Because such sales are deducted from government consumption expenditures, an increase in sales mechanically reduces the government line; the oil is captured elsewhere in GDP, so there is no direct effect on the topline.
Advance estimates are based on incomplete source data and are subject to revision. Q1 2026 itself was revised twice, down to 1.6% in the second estimate before being revised up to 2.1% in the third. BEA will publish its second estimate of Q2 GDP, along with corporate profits, on August 26. The 2026 annual update of the national, industry, state and county accounts begins September 30.