The U.S. economy grew at a 2.2% pace in the second quarter, according to the Commerce Department, improving from a 1.5% estimate and beating expectations for little or no change.
Consumer spending rose at a 3.8% annual pace, up from 0.7% in the first quarter. Business investment excluding housing climbed at a 9% clip, reflecting the AI investment boom. A measure of underlying strength that strips out volatile government spending and trade grew at a 4.6% rate.
Imports rose at a 12.6% annual pace and cut nearly 1.7 percentage points from growth. The increase was partly tied to shipments of computer chips and other products supporting artificial intelligence investment.
The housing market also showed a small improvement. Investment in housing rose 2.8%, the first increase since the end of 2024, after being depressed by high mortgage rates.
Michael Pearce, chief U.S. economist at Oxford Economics, said the economy is 'increasingly reliant on AI gains and the corresponding wealth effects boosting higher-income households' spending power to fuel recent growth.' He added that the economy remains sensitive to a 'sudden reversal of optimism on AI.'
The report also noted that the economy held up despite fighting with Iran and the energy price spike it caused.
For markets, the message is clear: growth is still coming from capital allocation, investment, and spending power tied to assets rather than from broad-based household strength. That is a reminder that when the stock market does the heavy lifting, the gains do not spread evenly.
The market has already voted on where the next leg of growth may come from. If AI keeps drawing capital and lifting margins, Washington will claim the credit. But the numbers come first, and they show an economy leaning hard on a narrow set of winners.
