U.S. GDP rises 1.5% annualized, reflecting resilient consumer spending

2026-07-30

Consumer spending supports growth

Real U.S. gross domestic product rose 1.5% in the April-June 2026 quarter at a seasonally adjusted annualized rate, the Commerce Department said on the 30th. That was slower than 2.1% in January-March, but consumer spending remained firm and supported economic growth. Market forecasts had called for growth in the high 1% range to the low 2% range.

Consumer spending rises 3.2%

Consumer spending, which accounts for 70% of GDP, rose 3.2%. Atlanta Fed GDPNow estimated 2.5%. Consumer spending alone added 2.1 percentage points to GDP growth.

Tax cuts and investment lift growth

Under Trump administration tax cuts, refunds tax payers received in this spring's returns exceeded the previous year. Lower- and middle-income households also supported spending by drawing down savings to maintain living standards. Moves to substitute domestic travel for overseas trips amid high gasoline prices may have given tourism and dining a boost, and some say the FIFA World Cup held across the three North American countries was also a supportive factor.

The U.S. personal consumption expenditures, or PCE, price index rose 5.1% on an annualized quarter-on-quarter basis in April-June. The increase widened from 4.6% in January-March and was the largest since April-June 2022. Housing investment rose 1.5%, turning positive for the first time since October-December 2024. Mortgage rates remain high, but remodeling demand expanded. Business capital investment rose 8.4%, with data center construction for artificial intelligence, or AI, continuing to lead the way.

Import growth weighs on growth

On external demand, exports rose 4.5% and imports rose 11.5%. Overseas sourcing of information and communications equipment such as advanced semiconductors needed for AI investment increased, and the expansion in imports worked as a negative in GDP calculations. As a result, it weighed on growth in April-June.

Solid consumer spending and capital investment are likely to reinforce the Federal Reserve's inflation caution. The Federal Open Market Committee on the 29th left the policy rate unchanged, but some participants proposed a rate increase. The situation in the Middle East also remains unclear, and the United States and Iran intensified fighting again in July. A final ceasefire is hard to foresee, and disruptions to global energy supplies could further intensify inflationary pressures.

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