U.S. Economy Continues to Grow as Inflation Remains Elevated

The updated estimate showed that real gross domestic product, or GDP, increased at an annual rate of 1.5% during the second quarter. The figure was unchanged from the government's initial estimate released earlier in the summer. However, it represented a slowdown compared with the 2.1% annualized growth recorded during the first quarter of the year.

GDP is one of the broadest measures of economic activity in the United States. It tracks the value of goods and services produced throughout the economy and is closely watched for signs of expansion or contraction. While the second-quarter figure showed slower growth, it also confirmed that the economy continued to expand rather than contract.

Consumer spending remained one of the strongest parts of the economy. Household consumption increased at a 3.4% annual rate during the second quarter, helping support overall economic activity. Consumer spending is particularly important because it represents a substantial portion of economic output in the United States.

The stronger household spending indicated that consumers continued to purchase goods and services despite higher prices. Spending patterns can provide an important indication of how households are responding to changes in employment, income and the cost of everyday necessities.

Several other factors influenced the second-quarter growth figure. Imports increased substantially during the period, which reduced the headline GDP growth rate because imports are subtracted from the calculation of domestic production. Business investment also remained an important part of economic activity, with companies continuing to spend on equipment, technology and other productive assets.

The latest inflation figures provided another important part of the economic picture. Consumer prices, as measured by the Personal Consumption Expenditures price index, increased 0.2% in July from the previous month. Compared with July 2025, prices were 3.7% higher.

The core PCE price index, which excludes food and energy prices because those categories can experience larger short-term fluctuations, also increased 0.2% during July. Over the previous 12 months, core prices increased 3.3%.

The numbers show that inflation has continued to affect the cost of goods and services purchased by American households. Although the monthly increase was relatively modest, the annual figures demonstrate that prices remain considerably higher than they were a year earlier.

For consumers, the impact of inflation can vary considerably depending on household spending habits. Families that spend more on housing, transportation, food or other categories experiencing faster price increases may feel greater pressure than households with different spending patterns.

The combination of continued economic growth and persistent inflation creates a mixed picture for the broader economy. Economic expansion suggests that businesses and consumers remain active, while elevated inflation indicates that price pressures have not completely disappeared.

The latest figures are also significant because economic data are closely monitored by businesses, financial institutions and policymakers when assessing future economic conditions. However, a single monthly inflation report or quarterly GDP estimate does not determine the direction of the economy by itself. Economic conditions can change as employment, consumer spending, business investment and prices develop over subsequent months.

The GDP figures will also be subject to another update. Additional information collected by government statisticians can lead to revisions in previously reported economic data. The next estimate will provide a further look at second-quarter economic performance.

For Americans, the most important takeaway from the August 26 reports is that the economy remains in expansion, but growth is occurring at a slower pace than earlier in the year. At the same time, inflation continues to influence household budgets and business costs.

Consumer spending remains a major source of economic strength, while higher imports and other factors have limited the pace of overall growth. Meanwhile, the continued rise in consumer prices shows that inflation remains an important economic issue.

The latest data therefore present a picture of an economy balancing two competing conditions: continued growth and ongoing price pressures. Future reports on employment, spending, inflation and economic output will provide a clearer indication of whether these trends persist through the remainder of 2026.