Growth
Written October 1, before the latest retail sales, industrial production and consumer sentiment. The numbers and charts on this page are current; figures in the text may not be.
Growth has cooled from last year's peak but has not stalled
The economy grew at an annualized 2.2% in the second quarter of 2026, down from 4.0% a year earlier and 2.5% in the first quarter. Retail sales are up 5.36% on a year ago in August.
The Briefing · Written October 1, 2026 · Numbers and charts update with each release
Growth fell to 0.2% in Q4 2025, then recovered to 2.5% and 2.2%
Real GDP growth by quarter, annualized %
Source: BEA.
The slowdown is real but modest. GDP growth of 2.2% compares with 2.5% in the first quarter and 4.0% in the second quarter of 2025. The average of the last four quarters is 2.2%, against 2.42% for the four before. The quarterly path has been uneven: 3.9% in the third quarter of 2025, then 0.2% in the fourth, then back above 2%.
Spending and factories are holding up better than the mood suggests. Retail sales rose 5.36% from a year earlier in August, and industrial production rose 1.42%. Consumer sentiment is 51.7, below the 58.2 of a year ago. Income after inflation is growing 1.3% a year, down from 1.73% a year ago. The read changes if the October 29 GDP release shows growth below the 0.2% of Q4 2025, or if retail sales, due October 15, fall below the 1.81% low of December 2025.
What 2.2% growth means for you
Income after inflation is still growing, but more slowly
Disposable income after inflation is up 1.3% from a year ago in August, compared with 1.73% a year earlier. Its low over the past two years was 0.23% in April 2026.
Households feel worse than the spending data suggests
Consumer sentiment fell 3.5 points in August to 51.7. It is 6.5 points below a year ago.
Shoppers are still spending
Retail sales rose 5.36% from a year earlier in August, up from 4.4% in July. The high of the past two years was 7.05% in May 2026.
The next test: what would change the answer
Moderate confidence. The economy is growing more slowly than a year ago, but at 2.2% it is not contracting. Spending and factory output are firm while sentiment is weak.
GDP growth in the October 29 release below the 0.2% of Q4 2025
Retail sales growth, due October 15, below the 1.81% low of December 2025
Industrial production growth, due October 16, below the 0.69% of March 2026, its lowest reading in the past year
Questions readers ask
Is the US economy slowing down?
Yes, modestly. GDP grew at an annualized 2.2% in Q2 2026, down from 2.5% in Q1 and 4.0% a year earlier. Growth is still positive.
What was US GDP growth in the second quarter of 2026?
An annualized 2.2%. That is 0.3 percentage points below the first quarter's 2.5%. The next GDP release is October 29.
Are consumers still spending?
Yes. Retail sales rose 5.36% from a year earlier in August, up from 4.4% in July. The three-month average is 5.31%.
How is industrial production doing?
Output rose 1.42% from a year earlier in August, up from 1.13% in July. Capacity utilization was 76.27%, against 76.11% a year ago.
How do households feel about the economy?
Poorly. Consumer sentiment was 51.7 in August, down from 55.2 in July and 58.2 a year ago. It reached 44.8 in May 2026, its low of the past two years.