US economy grows sluggish 1.5% in second quarter as inflation tops Fed target

The US economy expanded at a sluggish 1.5% pace from April through June as rising imports weighed on growth. But consumer spending rose. The commerce department reported on Thursday that growth in US gross domestic product decelerated from 2.1% in the first three months of 2026 and came in below economists' expectations. The latest data paints a clearer picture of the effects the war in the Middle East has had on the economy after increasing energy prices and pushing inflation higher. The pressure is growing within the Fed to raise interest rates in order to combat heightened inflation. Higher costs have frustrated Americans ahead of November's midterm elections. Two-thirds of Americans, including 49% of Republicans, say they have little faith the federal government will address the high prices they face. Still, the US economy has proven surprisingly resilient in the face of the Iran war and the spike in energy prices it caused.