US Second Quarter GDP Growth Stalls at 1.5% Amid Trade Volatility

Consumer spending, which accounts for two-thirds of U.S. economic activity, climbed 3.2% as households remained surprisingly resilient despite inflationary pressures and the ongoing conflict involving Iran. Business investment emerged as the primary engine of growth, with nonresidential fixed investment surging 8.4%. Spending on industrial equipment saw its sharpest increase since 2011, bolstered by a debt-fueled rush to build out AI capacity. Federal Reserve Chairman Kevin Warsh described this corporate investment as the most striking feature of the current economic landscape, even as three policymakers pushed for rate hikes to combat persistent inflation.

The headline growth figure was suppressed by volatile external factors. Net exports subtracted a full percentage point from GDP, largely due to a surge in imports as businesses front-loaded goods to beat impending tariffs. Inventory drawdowns further reduced growth by 0.67%. Despite these drags, a metric of underlying demand—final sales to private domestic purchasers—jumped 3.9%, the strongest performance since early 2023. While geopolitical uncertainty and tariff policies loom over the second half of the year, limited layoffs and robust June consumer data suggest the economy retains significant momentum.