Growth in U.S. economic activity in the second quarter accelerated from the first quarter, according to the initial estimate released by the Commerce Department on Friday, although the pace of growth came in well below economist estimates.
The report said gross domestic product climbed by 1.2 percent in the second quarter following a downwardly revised 0.8 percent increase in the first quarter.
Economists had expected GDP to jump by 2.6 percent compared to the 1.1 percent growth that had been reported for the previous quarter.
The second quarter GDP growth partly reflected a positive contribution from consumer spending, which surged up by 4.2 percent.
A rebound in exports also contributed to the GDP growth, with exports climbing by 1.4 percent in the second quarter after falling in the three previous quarters.
However, the growth was partly offset by negative contributions from private inventory investment, non-residential fixed investment, residential fixed investment, and state and local government spending.
The faster growth compared to the first quarter reflected an acceleration in consumer spending, the upturn in exports, and smaller decreases in non-residential fixed investment and federal government spending. "The disappointing 1.2% annualized gain in second-quarter GDP growth, combined with the downward revisions to gains in the preceding two quarters, make a September interest rate hike much less likely," said Paul Ashworth, Chief U.S. Economist at Capital Economics.
"Over the past 12 months, the economy has expanded by only 1.2%," he added. "What is really worrying is that pace has still been enough to reduce the unemployment rate further, suggesting that the economy's potential growth rate could conceivably be close to zero."
On the inflation front, the Commerce Department said its reading on core consumer prices, which exclude food and energy prices, climbed by 1.7 in the second quarter after jumping by 2.1 percent in the first quarter.
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May 01, 2026 15:54 ET Central banks dominated the economics news flow this week with almost all major ones announcing their latest policy decisions and many boosted expectations for a rate hike in June. In other news, several countries released the preliminary data for first quarter economic growth. In the U.S., comments by Fed Chair Jerome Powell were also in focus as his term ends this month.