US GDP growth slows to 1.5% in Q2; consumer spending and AI investments keep outlook positive: ICICI Bank
Mumbai, August 1
The US economy slowed more than expected in the second quarter of 2026, but strong consumer spending and continued investments in artificial intelligence are expected to support growth in the coming quarters, according to an ICICI Bank report.
The report said US GDP growth eased to 1.5 per cent quarter-on-quarter seasonally adjusted annual rate (QoQsaar) in the April-June quarter from 2.1 per cent in the previous quarter, falling short of market expectations of 2.1 per cent. The slowdown was mainly due to higher net imports and lower government spending, despite resilient domestic demand.
According to the report, private consumption, which accounts for around two-thirds of US GDP, rebounded sharply to 3.2 per cent in Q2 from 0.5 per cent in the previous quarter, supported by tax refunds and spending related to the FIFA World Cup tournament. Business investment also remained firm, driven by AI-related spending.
"Given underlying consumption and investment drivers are intact, growth should pick-up in coming quarters even as the boost from hosting the World Cup will wane. Overall growth for the year is estimated at around 2% QoQsaar," the report said.
The report noted that non-residential investment moderated to 8.4 per cent from 10.6 per cent in the previous quarter, but technology investments remained strong. It added that capital expenditure by major US technology companies is expected to remain a key driver of economic expansion through 2026.
At the same time, imports continued to weigh on headline growth, rising 11.5 per cent in the second quarter, while exports slowed to 4.5 per cent. Government spending contracted 0.8 per cent after expanding 4.4 per cent in the previous quarter, further dragging on GDP growth.
"Domestic demand remains firm that was visible in the final sales to private domestic purchasers, which saw a growth of 3.9% QoQsaar in Q22026 from 1.7% recorded in Q12026, the strongest since early," the report added.
On the policy front, ICICI Bank said the latest GDP data supports the US Federal Reserve's decision to keep interest rates unchanged. However, it added that the central bank is likely to remain data-dependent, with energy prices continuing to pose an upside risk to inflation.
"If inflation starts inching up in response to higher oil prices, the Fed could start tightening policy later this year," the report said.
— ANI
Reader Comments
The Fed keeping rates unchanged was expected. But the report's concern about oil prices impacting inflation is valid - we've seen in India how global energy prices affect everything. If the Fed tightens later this year, there could be ripple effects on capital flows to emerging markets like India. Let's hope they manage this carefully.
As someone working in the tech sector in Bangalore, I can confirm the AI investment wave is real. Companies in the US and India are pouring money into AI infrastructure. If US tech capex continues, it's good news for Indian IT services companies too. The GDP slowdown might just be a temporary blip.
Indian analysts at ICICI Bank covering US macro data - this shows how integrated the global economy has become. The report is balanced - it highlights the good (private consumption, AI investments) and the not-so-good (imports drag, government spending cuts). I'd be cautious though; 1.5% growth is still better than many countries. Also agree with their view on oil prices - Middle East tensions are up.
It's reassuring to see the US economy isn't collapsing - the slowdown is modest. But the report's point about government spending contractions is worth watching. In India, we know how important fiscal policy is for growth. Also, the strong private consumption at 3.2% shows American consumers are still spending, which matters for our exports.
One point I'd respectfully question - the report seems a bit too optimistic about AI investments keeping the US economy afloat. We
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