The U.S. economy grew at a sluggish 1.5% pace in the second quarter of 2025, down from 2.1% in the first quarter. Consumer spending, which accounts for about 70% of U.S. economic activity, increased at a healthy 3.4% annual rate, up from 0.5% in the first quarter. The main drag on growth came from imports rising at a 12.5% annual pace, subtracting 1.64 percentage points from GDP growth. The inflation measure closely watched by the Federal Reserve held steady at 3.7% in July, well above the Fed’s 2% target, driven higher by the conflict with Iran and elevated energy prices. Business investment excluding housing surged 8.5%, reflecting the artificial intelligence investment boom.
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