U.S. GDP Grew 2.2% in Q2 as AI Boom Powered Spending

The U.S. economy grew at a 2.2% annual pace from April through June, an upward revision from the Commerce Department's previous estimate of 1.5% and a surprise to economists who expected little or no change in the figure.

The second-quarter number, reported Wednesday, still marks a deceleration from the 2.5% growth pace recorded from January through March. It was the last of three Commerce Department estimates of second-quarter GDP.

Consumer spending drove the expansion. Spending, which accounts for about 70% of U.S. economic activity, increased at a 3.8% annual pace — up sharply from 0.7% in the first quarter. A strong stock market, reflecting enthusiasm over the prospects for artificial intelligence, has enriched wealthy investors and given them more money to spend.

Business investment excluding housing rose at a 9% clip in the second quarter, reflecting the AI investment boom. A measure of the economy's underlying strength — which strips out volatile government spending and trade numbers — grew at a 4.6% rate, up from 1.8% in the first quarter.

Imports dragged down the headline number. Because GDP counts only domestic production, imports are subtracted from growth. Imports rose at a 12.6% annual pace from April through June, partly due to a surge in shipments of computer chips and other products supporting artificial intelligence investment. They cut nearly 1.7 percentage points off second-quarter growth.

The economy has proven surprisingly resilient in the face of fighting with Iran and the energy price spike it caused.

Housing investment rose 2.8%, ticking up for the first time since the end of 2024. The housing market has been depressed by high mortgage rates.

"The economy is increasingly reliant on AI gains and the corresponding wealth effects boosting higher-income households' spending power to fuel recent growth," said Michael Pearce, chief U.S. economist at Oxford Economics. "The economy remains sensitive to a sudden reversal of optimism on AI."

The Commerce Department's first look at third-quarter growth is due Oct. 29. That report will show whether consumer spending and AI-driven business investment can keep offsetting the import drag and housing weakness that held back the second quarter.