US Economy Likely Grew 2.1% in Q2 on AI Spending, Consumer Rebound

The U.S. economy likely grew at a 2.1% annualized rate in the second quarter, matching the prior period, according to a Reuters survey of economists, driven by an AI investment boom and a rebound in consumer spending. However, JPMorgan lowered its estimate to 1.5% after June's trade data, and economists warn that higher energy prices from the U.S.-led war with Iran and a low saving rate of 3.0% could slow growth in the second half.

July 30, 2026 , Inside AI — The U.S. economy likely grew at a steady 2.1% annualized rate in the second quarter, matching the prior period, according to a Reuters survey of economists. The advance GDP report from the Commerce Department, due Thursday, is expected to show consumer spending rebounded from a sluggish first quarter while business investment in AI-related equipment remained robust. The expansion comes despite the U.S.-led war with Iran, now in its sixth month, which has pushed average gasoline prices above $4 a gallon. Bigger tax refunds from President Donald Trump's "One Big Beautiful Bill" and strong asset prices for higher-income households helped cushion consumers. The recently ended FIFA World Cup and midterm election-related spending by nonprofits also provided a temporary lift. "The U.S. has been much more insulated from the economic fallout from the conflict in the Middle East than other parts of the world have been," said James Knightley, chief international economist at ING. "The consumer is still spending and we have the ongoing frenzied tech investment cycle that we're seeing." However, the Reuters survey was conducted before June's advance economic indicators report, which showed a moderate contraction in the goods trade deficit and unchanged retail inventories. Economists at JPMorgan subsequently lowered their GDP growth estimate to a 1.5% rate from 2.0% . Trade could subtract as much as a full percentage point from GDP growth, and inventories remain a wild card. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, likely accelerated after abruptly slowing to a 0.5% growth pace in the first quarter. But economists warn that tailwinds are fading. The saving rate is near a four-year low of 3.0% , and households have been tapping savings to maintain spending as wages barely keep up with inflation. "While the boost from higher tax refunds and lower tax payments appears to have provided a $140 billion boost to household income during the 2026 tax-filing season, we expect that higher energy prices will erode household spending power for the rest of the year, particularly for lower-income households that spend a larger share of their budget on energy," said Joseph Briggs, an economist at Goldman Sachs. Briggs forecast the saving rate increasing to 3.5% by year-end, "on the back of a stronger precautionary saving motive." AI Investment Boom Masks Broader Business Weakness Another quarter of double-digit growth in business spending on equipment was expected, driven by the AI investment boom. This rapid growth in AI is masking weakness in business investment in structures, like factories, which is expected to have contracted for a 10th straight quarter. The divergence highlights how AI infrastructure buildout is dominating capital expenditure, even as traditional industrial investment lags. Final sales to private domestic purchasers, which exclude government, trade and inventories and are closely watched by the Federal Reserve , increased at a 1.7% pace in the first quarter. The Fed on Wednesday left its benchmark overnight interest rate in a 3.50%-3.75% range, with three committee members dissenting in favor of a quarter-point hike. Economists expect the Fed to raise rates as soon as September to quell inflation, which factors into expectations for slower growth in the second half. "The Fed is going to become increasingly impatient with inflation, thanks to this war," said Brian Bethune, an economics professor at Boston College. "We've already had an effective tightening of monetary policy because of the steepening of the Treasury yield curve and mortgage rates are up at least a half a point since the start of the war." War's Economic Footprint Remains Muted Residential investment, including homebuilding and sales, is expected to have contracted for the sixth consecutive quarter. No boost to government spending was expected from the war, with defense outlays likely flat. "Action against Iran mostly has drawn on existing personnel and military assets, and running down pre-existing stockpiles of munitions, rather than on a widespread recruitment drive or heavy investment in new equipment," said Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics. "The 1990-91 Gulf War had a barely perceptible impact in the national accounts, despite being a far bigger operation." The AI investment cycle, however, continues to draw scrutiny. A recent IMF working paper https://www.imf.org/en/Publications/WP/Issues/2024/01/14/Gen-AI-Artificial-Intelligence-and-the-Future-of-Work-542379 notes that AI could boost productivity but also widen inequality, while the White House Council of Economic Advisers https://www.whitehouse.gov/cea/written-materials/2024/03/21/the-potential-economic-impacts-of-ai-an-update/ has highlighted both the growth potential and labor market disruptions from AI. As the GDP report lands, the interplay between AI-driven capital spending and consumer resilience will be key to assessing the economy's trajectory.