The Trump administration is dealing with headwinds leading into the midterms.
A disappointing new report reveals the U.S. economy grew at a less-than-expected pace in the second quarter. Economists had projected a 1.8 percent GDP growth rate.
The numbers came in at a pedestrian 1.5 percent, down from 2.1 percent in the first quarter.
The U.S. economy expanded at a sluggish 1.5% pace from April through June as rising imports weighed on growth. But consumer spending rose. And the Federal Reserve’s favored measure of inflation grew more slowly last month, but remained above the central bank’s 2% target.
The Commerce Department reported Thursday that growth in U.S. gross domestic product — the nation’s output of goods and services — decelerated from 2.1% in the first three months of 2026 and came in below economists’ expectations. But consumer spending — which accounts for about 70% of U.S. economic activity — increased at a 3.2% annual clip, up from 0.5% in the January-March period.
The GDP numbers are a concerning backdrop for the issue forefront in Americans' minds: nagging inflation.
Inflation declined slightly on the month, falling 0.1 percent in June. But the annual rate fell appreciably to 3.7 percent, down from 4.1 percent year-over-year in May.
READ MORE: Central Bank Makes Second Interest Rate Decision Under Fed Chair Warsh
As RedState editor Becca Lower noted, the Federal Reserve left interest rates unchanged after its meeting on Wednesday. Three regional Fed presidents wanted to raise the interest rates to further curb inflation.
The Fed report blamed increasing energy prices as one reason for the stickier elevated inflation rate.
In a 9-3 vote, Fed officials decided to maintain the federal funds rate within a target range of 3.5% to 3.75%. The three dissenting votes supported raising the rate by 25 basis points.
In its policy statement, the central bank acknowledged that inflation is still running above its long-term target of 2%. Officials pointed to ongoing supply-related disruptions, particularly in the energy sector, as a major contributor to higher prices. [...]
Inflation had climbed to an annual rate of 4.2% in May — the highest reading in more than three years — largely because gasoline prices surged during the U.S. conflict with Iran. Although oil and natural gas prices have eased somewhat since then, renewed military activity near the Strait of Hormuz has raised concerns that fuel costs could stay elevated in the months ahead.
There are hopeful signs on the horizon, however, as noted by the Associated Press.
But consumer spending — which accounts for about 70% of U.S. economic activity — increased at a 3.2% annual clip, up from 0.5% in the January-March period.
Business investment, excluding housing, rose at an 8.4% pace, down from 10.6% from January through March but strong, reflecting a surge in investment in artificial intelligence.
Imports are subtracted from the economic figures because GDP is only supposed to count what is produced in the United States. Imports rose at an 11.5% pace, partly on a surge in shipments of computer chips and other products that support AI investment. The imports shaved 1.5 percentage off second-quarter GDP growth.
Furthermore, the job market has been relatively stable given all of the unfavorable conditions, including AI-related layoffs, elevated energy prices, and affordability issues.
Higher costs have frustrated Americans ahead of November’s midterm elections, which will determine whether President Donald Trump’s Republicans keep full control of Congress
The American economy has been surprisingly resilient in the face of the Iran war and the spike in energy prices it caused. The job market has bounced back this year from a lackluster 2025, giving consumers the wherewithal to spend. Employers are adding an average 92,000 jobs a month this year, compared with fewer than 10,000 a month in 2025 when high interest rates and President Donald Trump’s erratic use of tariffs discouraged businesses from hiring.
The Trump administration's policies have significantly improved the economy, compared to those of the disastrous Biden administration. But Americans may forget how bad it was, and not be soon to forgive a perceived lack of domestic focus ahead of the midterm elections.
According to a new AP-NORC poll, the average American does not believe the Iran War has been worth it.
About two-thirds of U.S. adults say the war with Iran, which began Feb. 28, has not been worthwhile, according to the new poll from The Associated Press-NORC Center for Public Affairs Research. That includes the vast majority of Democrats and independents, as well as about 37% of Republicans.
The Iran War appears to be having a negative effect on President Trump's popularity. Results were based on interviews with 1,165 U.S. adults conducted July 23-27, 2026. The margin of error was ±3.7 percentage points for the full sample.
The survey reinforces how unpopular the Iran war has become at home, a potential problem for congressional Republicans up for reelection in November who have defended Trump’s military actions. Just 28% of U.S. adults now approve of how Trump is handling Iran, a slight decline from 34% last month. Even Republicans appear to be increasingly unhappy with the prolonged conflict. Roughly 61% of Republicans approve of how Trump is handling Iran, an apparent decline from 71% in June. The margin of sampling error for Republicans is 6 points, so the decline is considered slight, but it’s still noteworthy given Republicans’ much higher approval of how Trump is handling the presidency overall.
Trump’s overall approval rating is at 33%, slightly below where he stood at this point in his first term and similar to where former President Joe Biden stood about one and a half years into his presidency, when inflation peaked.
The Iran War remains a formidable challenge for the Trump administration, particularly in that it has an impact on global energy prices.
If Americans feel like the war is having a negative impact on affordability, it could dampen the Republican Party's election prospects.
Editor’s Note: Thanks to President Trump’s leadership and bold policies, America’s economy is back on track.
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