U.S. Q2 Growth Slows to 1.5%... Consumption and AI Investment Provide Support

Personal Consumption Rises 3.2% Despite High Oil Prices and Tariffs
Expansion in Equipment and Intellectual Property Investment
Private Demand Hits Highest Level in Over Three Years
Surge in Imports and Decreased Government Spending Drag Down Growth Rate

The U.S. second-quarter economic growth rate fell short of market expectations and slowed compared to the first quarter. However, despite higher oil prices driven by the war in Iran and tariff burdens, personal consumption surged, and investment related to artificial intelligence (AI) continued, demonstrating that the fundamental strength of the U.S. economy remains robust.

On July 30 (local time), the U.S. Department of Commerce announced that Gross Domestic Product (GDP) for the second quarter of this year increased by an annualized 1.5% compared to the previous quarter. This figure is lower than the 2.1% growth rate in the first quarter and also below the expert forecast of 1.8% surveyed by Dow Jones.

Unlike Korea, the U.S. reports economic growth rates as annualized figures based on quarter-over-quarter changes. The growth slowdown in the second quarter was influenced by reduced government spending and increased imports. Although personal consumption, private investment, and exports all grew, a decrease in federal government spending and a sharp rise in imports pulled down the overall growth rate.

Personal consumption, which accounts for about two-thirds of the U.S. economy, increased by 3.2%. This is a substantial rise from the 0.5% growth in the first quarter. The contribution of personal consumption to economic growth reached 2.12 percentage points.

The market had expected consumer spending to slow in the second quarter due to higher energy prices and tariff hikes resulting from the war in Iran. However, actual consumer spending improved instead.

Private investment also supported growth, increasing by 3.0% on the back of rising expenditures for AI infrastructure. Equipment investment rose by 15.2%, and investment in intellectual property products increased by 8.8%, marking a continued strong growth trend from the first quarter. Investments in AI-related facilities such as data centers, semiconductors, and telecommunications equipment are considered major drivers of U.S. economic growth.

Government spending decreased by 0.8%. In particular, federal government spending dropped by 4.1%, leading the overall decline in government expenditures. The Department of Commerce explained that, in response to high oil prices due to the war in Iran, the government released oil from the Strategic Petroleum Reserve (SPR), with related sales deducted from government spending.

The external sector also contributed to the lower growth rate. While exports increased by 4.5% in the second quarter, imports surged by 11.5%. This was mainly due to a significant increase in imports of capital goods, including telecommunications equipment and semiconductors.

As a result, net exports—exports minus imports—reduced the second-quarter growth rate by 1.01 percentage points. Net exports also negatively affected the growth rate in the previous first quarter.

In contrast, final sales to domestic private purchasers—an indicator of underlying domestic private demand that excludes government spending and trade—increased by 3.9%. This is the highest rate of increase in over three years since the first quarter of 2023, when it reached 4.6%. While the headline growth figures have slowed, private demand, driven by consumption and corporate investment, has actually strengthened.

This GDP data was released as the Fed kept its benchmark interest rate steady at an annual rate of 3.50 to 3.75% the previous day. Fed Chair Kevin Warsh commented at a press conference that "the U.S. economy is demonstrating impressive resilience."

This content was produced with the assistance of AI translation services.