U.S. economic growth slowed unexpectedly in the second quarter

U.S. ​economic growth slowed in the second quarter as the trade deficit widened, but consumer spending growth points to underlying strength.

U.S. ​economic growth slowed in the second quarter amid a widening in the trade deficit, but an acceleration ‌in consumer spending and robust business investment in equipment related to the buildout of artificial intelligence infrastructure pointed to underlying strength.

Gross domestic product increased at a 1.5% annualized rate last quarter, the Commerce Department’s Bureau of Economic Analysis said in its advance estimate of second-quarter GDP on Thursday. Economists polled ​by Reuters had forecast GDP rising at a 2.1% pace. Estimates ranged from a 0.8% rate to a ​2.9% pace.

The survey was, however, conducted before the release of June’s advance economic indicators report, which showed ⁠a moderate contraction in the goods trade deficit and retail inventories unchanged. That data prompted some economists to cut their ​GDP estimates by as much as 0.8 percentage point to as low as a 1.5% rate. The economy grew at a ​2.1% pace in the first quarter.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, surged at a 3.2% rate last quarter after abruptly slowing to a 0.5% growth pace in the January-March quarter. Despite the Middle East conflict, spending has remained resilient, in part thanks to ​bigger tax refunds this year, which provided a cushion for consumers against higher gasoline prices stemming from the war.

In addition ​to generous tax refunds from President Donald Trump’s “One Big Beautiful Bill,” higher-income households who are benefiting from strong growth in asset prices are ‌also driving ⁠spending. The recently ended FIFA World Cup tournament also likely helped to spur spending as did midterm election-related spending by nonprofits.