US economic growth estimates for the second quarter have experienced a material decline, with Q2 growth now estimated at a sluggish 1.3% (real annualized rate) according to recent nowcasts compiled by The Capital Spectator. This represents a significant downshift from the 2.1% increase reported for Q1, marking a substantial deceleration in economic momentum. The current estimate also marks a material slowdown from the 2.5% estimate in the previous update from June 22, indicating a concerning trend in economic performance.
Despite the weaker GDP projections, recent retail sales data has shown robust consumer spending momentum. US retail sales rose sharply by 1.7% in March 2026, surpassing market expectations of 1.4% and following an upwardly revised 0.7% increase in February. This marks the steepest growth since March 2025, driven largely by a record 15.5% surge in gasoline station receipts as fuel prices spiked amid the escalating conflict with Iran. The strong retail performance provides a contrast to the weaker GDP nowcasts, suggesting underlying economic resilience in consumer-facing sectors.
The softer nowcast reflects three key factors in recent economic data: lower exports, a decline in expectations for consumer spending, and cooler forecasts for domestic investment. According to reports from Investing.com India, the combination of these changes has weighed on various nowcasts, including the Atlanta Fed's GDPNow model, which is currently nowcasting Q2 growth at just 1.2% as of July 1, down sharply from 3%-plus a few weeks earlier. Despite this weakness, some economists view the downshift as less concerning than it appears.
Despite the weaker headline GDP estimates, economists point to underlying strength in domestic economic activity. Renaissance Macro Research noted that while Q2 GDPNow is lower, the bulk of the recent drop stems from a wider trade gap. As reported by Investing.com India, excluding net exports and inventory investment, private domestic demand is tracking close to 2.5%, which is considered respectable performance. The strongest nowcast in the current analysis comes from the New York Fed's 2.74% estimate from July 3, which remains essentially unchanged and well above the weaker GDPNow projections.
The government's official Q2 report is scheduled for July 30, leaving the possibility that incoming data could revive the weaker nowcast estimates. According to The Capital Spectator's standard practice, their median estimate serves as the best real-time guesstimate for economic performance. If optimists prove correct and Q2 activity is stronger than current nowcasts suggest, the median estimate could move higher in the weeks ahead of the official data release, potentially providing a more accurate picture of second-quarter economic performance.
