The US economy grew at a slower pace in the second quarter, as a widening trade deficit and tensions with Iran weighed on global fuel prices and consumer spending.

Gross domestic product (GDP) expanded at an annualized rate of 1.5 percent in the April-June period, down from 2.1 percent in the first quarter of 2026, according to the Commerce Department's Bureau of Economic Analysis report released Thursday.

Consumer spending rose 3.2 percent in the quarter, boosted by tax refunds from President Donald Trump's 'One Big Beautiful Bill Act' and higher gasoline prices.

The average price for a gallon of gasoline stood at $4.09, up from $3.84 a month ago. By comparison, the average price was $2.98 when the US and Israel first struck Iran on February 28.

Analysts also pointed to the artificial intelligence spending boom as a driver, though those investments are heavily import-reliant and contribute to trade deficits.

"Overall, the economy continues to rely on technology investment," said Rachel Ziemba, adjunct senior fellow at the Center for a New American Security.

Nvidia is reportedly in talks to invest $250 million in OpenAI. However, concerns persist about the sustainability of such investments amid questions over circular financing.

The Personal Consumption Expenditure (PCE) price index rose 3.7 percent annually in June, down from a 4.1 percent surge in May.

"Today's report is a snapshot of an economy under a ceasefire that no longer exists," said Alex Jacquez, a member of the National Economic Council under former President Joe Biden.

The Federal Reserve maintained interest rates at 3.5-3.75 percent on Wednesday.

US stock markets rose in midday trading, with the Nasdaq up 2.6 percent, the S&P 500 up 1.2 percent, and the Dow Jones up 0.5 percent.

Gold prices extended gains, rising 1.9 percent to $4,108.30 per ounce.

Source: www.aljazeera.com