The economy grew at an annual rate of 1.5% in the three months to June, down from 2.1% seen in the previous quarter.

There was a surprise slowdown in US economic growth in the three months to June despite an increase in consumer spending, according to official figures. The Commerce Department said the US economy grew at an annual rate of 1.5% in the second quarter, down from 2.1% seen in the first three months of the year. Analysts had forecast growth to remain around 2%. It comes as the world's largest economy continues to weather the financial impact of the war with Iran and US businesses navigate tariffs. The second quarter downturn was due to lower government spending, investment and exports, which offset the boost in consumer spending. Consumer spending, which accounts for more than two-thirds of economic activity in the US, grew at a rate of 3.2% last quarter after slowing to 0.5% earlier this year. Despite prices rising at 3.5% in the year to June, Americans continued to spend on motor vehicles - particularly light-duty trucks - furniture and prescription drugs, according to surveys. Michael Pearce, chief US economist at Oxford Economics, said the growth slowdown underplayed the "strength" of the US economy and suggested the pace would return to above 2% later this year. He said there were signs that investment in industries away from the AI boom was "reviving".