The U.S. economy slowed its expansion in the second quarter this year, posting growth below market expectations.
The Commerce Department said on the 30th (local time) that U.S. gross domestic product (GDP) in the second quarter rose 1.5% at an annual rate from the previous quarter on a preliminary basis.
That is 0.6 percentage points lower than the 2.1% growth rate in the first quarter. It also fell short of the 1.8% forecast compiled by Dow Jones.
The United States adjusts quarter-over-quarter growth for seasonal factors and then annualizes it by assuming the trend continues for a year. The tallying method differs from Korea, which mainly uses the year-over-year growth rate.
The Commerce Department said consumption, investment, and exports increased, but a decline in government expenditure and a rise in imports offset them, lowering overall growth.
Personal consumption, the core pillar of the U.S. economy, rose 3.2% in the second quarter. Compared with the first quarter growth rate of 0.5%, the recovery in consumption became clear.
Markets had expected second-quarter consumption to contract due to high oil prices and the impact of tariff increases stemming from the U.S.-Iran war. However, personal consumption, contrary to such concerns, showed stronger growth than in the first quarter. Personal consumption contributed 2.12 percentage points to the second-quarter economic growth rate.
Private investment also grew 3.0% as investment in artificial intelligence (AI) infrastructure continued, driving second-quarter economic growth along with personal consumption.
Specifically, equipment investment rose 15.2%, and investment in intellectual property products increased 8.8%, maintaining high growth rates following the first quarter. The view is that expanded expenditure centered on AI infrastructure has become a key engine supporting the U.S. economy.
Government expenditure fell 0.8%. A 4.1% decline in federal government spending had a major impact.
The Commerce Department said federal government spending decreased as sales of the Strategic Petroleum Reserve (SPR) were deducted from government expenditure. The U.S. government has been releasing the reserve on a large scale to respond to soaring oil prices after the Iran war.
Exports rose 4.5% in the second quarter, but imports surged 11.5%. Increased demand for capital goods such as telecommunications equipment and semiconductors was seen as driving the rise in imports.
With import growth outpacing exports, net exports dragged down the second-quarter growth rate by 1.01 percentage points. Net exports also acted as a drag on economic growth in the first quarter.
The growth rate of final sales to domestic private purchasers, which shows the flow of private demand in the United States, recorded 3.9%. This is the highest level in about three years since 4.6% in the first quarter of 2023.
With both consumption and private investment showing solid trends, assessments say the fundamentals of the U.S. economy are strong.
The second-quarter GDP figures were released as the Federal Reserve left the benchmark interest rate unchanged at 3.50% to 3.75% the previous day.