U.S. Growth Slowed to 1.5% in the Second Quarter. July Sales Fell

The U.S. economy continued to expand in the second quarter, but the pace slowed from the start of the year—and a new July retail-sales decline is raising questions about whether consumers can keep supporting growth into the third quarter.

The Bureau of Economic Analysis said its advance estimate, released July 30, showed real gross domestic product grew at a 1.5% annual rate from April through June. That was down from a 2.1% annual rate in the first quarter.

The 1.5% figure is not final. BEA is scheduled to issue a second estimate on August 26, followed by a third estimate on September 30.

What supported growth

Consumer spending, business investment and exports contributed to the second-quarter increase. Consumer spending rose at a 3.2% annual pace, according to Associated Press reporting on the BEA release, making households an important source of momentum.

Higher imports and lower government spending partly offset that growth. Imports are subtracted in GDP accounting because GDP measures production within the United States. As a result, imports can reduce the headline GDP rate even when they reflect strong household demand, business investment or purchases of products used in U.S. production.

Associated Press reported that imports reduced the second-quarter growth rate by 1.5 percentage points. The effect helps explain why the headline number was weaker than some of the activity supporting the economy.

Why July retail sales matter

The newer development came August 14, when the Census Bureau released its advance estimate for July retail and food-services sales. The estimate put total sales at $763.6 billion, down 0.6% from June but up 5.0% from July 2025.

The monthly decline does not erase the year-over-year increase, and it does not establish that the economy is entering a recession. It matters because consumer spending was a major support for GDP in the second quarter. A weaker July reading may point to softer consumer momentum early in the third quarter.

The retail figure also needs to be read cautiously. It is seasonally adjusted for seasonal, holiday and trading-day differences, but it is not adjusted for price changes. The 0.6% decline therefore should not be described as a measured fall in the physical volume of goods and services purchased.

Census identifies the number as an advance estimate based on an early sample of businesses. The reported margin of sampling error for the headline monthly change is plus or minus 0.4 percentage points at a 90% confidence level. The bureau also says monthly estimates are expected to be revised; a tentative revision release is scheduled for September 28.

What the numbers do—and do not—show

Taken together, the data describe an economy that was still growing through June, but with less certainty about consumer momentum at the beginning of the next quarter. The second-quarter GDP estimate showed continued expansion, while the July retail report adds a warning sign rather than proof of a broader downturn.

For households, the key question is whether income and spending can remain strong enough to support purchases despite slower overall growth. For businesses, the retail data may affect decisions about inventories, hiring and investment, although one preliminary month is not enough to establish a trend.

What to watch next

The next major checkpoint is August 26, when BEA is scheduled to release its second estimate of second-quarter GDP along with July personal-income and outlays data. Those figures will provide a clearer look at income, consumer spending and the saving rate.

Later retail revisions and additional third-quarter data will also matter. Census has scheduled the August retail-sales report for September 16, while BEA’s next releases will provide information on consumer spending, imports, investment and government outlays. Until those reports arrive, the most defensible reading is continued growth at a slower pace—not stagnation and not a confirmed recession.

Sources

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