US GDP growth slows to 1.5% in second quarter

US gross domestic product grew at an annualized rate of 1.5% in the second quarter, the Commerce Department said Thursday, slowing from 2.1% in the previous quarter.

The Bureau of Economic Analysis said the slowdown in real GDP reflected a downturn in government spending and slower investment and exports, partly offset by faster consumer spending. It also cited an increase in imports, which are subtracted from GDP.

The data showed the world's largest economy growing more slowly despite recent support from investment linked to artificial intelligence. Consumption has been pressured by years of high prices, with the war in the Middle East adding pressure through higher energy costs.

The BEA said Personal Consumption Expenditures inflation slowed to 3.7% in June from 4.1% in May. Core PCE inflation, which excludes volatile food and energy prices, was 3.3%. The PCE measure is the Federal Reserve's preferred inflation gauge and remains above the central bank's long-term 2% target.

The Federal Reserve held interest rates steady on Wednesday, though three policymakers dissented and called for an immediate rate hike.

White House spokesman Kush Desai praised the latest GDP figures, saying “the core drivers of economic growth continue to surge.” Democratic Senator Elizabeth Warren criticised President Donald Trump over persistently high prices, saying his tariffs and the war in Iran had raised costs.

Chris Zaccarelli of Northlight Asset Management said the lower inflation figure could give the Fed room to keep holding rates, but that the GDP data could warn that the economy “is slowing too quickly.” Michael Pearce, chief US economist at Oxford Economics, said the 1.5% GDP rise understated the economy's strength because it reflected a drag from rising imports and falling inventories. Kathy Bostjancic, chief economist at Nationwide, said the headline figure masked strength in the core private domestic sector.