The Q2 2026 GDP second estimate left real growth unchanged at a 1.5% annual rate, but it raised the quarter's inflation readings and delivered the first look at corporate profits, which rose $400.9 billion from current production after a $74.4 billion gain in the first quarter, according to the Bureau of Economic Analysis release of August 26, 2026 [1]. The PCE price index for the quarter was revised up 0.2 point to 5.3% and core PCE to 3.6% [1]. Real gross domestic income, an alternative measure of output, grew 2.2%, and the average of GDP and GDI was 1.8% [1]. The report shows an economy growing slowly, with prices rising fast and a very large share of nominal income flowing to profits.
Q2 2026 GDP second estimate: what changed
The revision was a wash at the top line. Consumer spending was revised higher, but imports, which subtract from GDP, were also revised higher, so real GDP stayed at 1.5% [1]. First-quarter growth remains 2.1% [1]. Current-dollar GDP growth was revised to 8.0% from 7.9% [1]. The advance estimate had already shown private demand stronger than the headline, with real final sales to private domestic purchasers up 3.9%, so the upward revision to consumer spending reinforces that picture [3].
The price revisions matter more for policy. The PCE price index rose 5.3% annualized in the quarter, up from the 5.1% advance figure, and core PCE rose 3.6% instead of 3.4% [1]. The gross domestic purchases price index was revised to 5.8% from 5.7% [1]. These are the highest quarterly readings of the cycle and they were reported three weeks before the Federal Reserve's September meeting.
| Measure (Q2 2026, annualized) | Advance estimate | Second estimate |
|---|---|---|
| Real GDP | 1.5% | 1.5% |
| Current-dollar GDP | 7.9% | 8.0% |
| PCE price index | 5.1% | 5.3% |
| Core PCE price index | 3.4% | 3.6% |
| Real GDI | n/a | 2.2% |
| Corporate profits (change) | n/a | +$400.9 billion |
Corporate profits: the number that stands out
Profits from current production, which adjust for inventory valuation and capital consumption, increased $400.9 billion in the second quarter, more than five times the $74.4 billion increase in the first quarter [1]. A gain of that size in one quarter reflects the mechanics of nominal growth: with current-dollar GDP rising 8.0% annualized and real output only 1.5%, the difference is price, and companies that raised prices faster than costs captured it [1]. That is good for equity earnings in the short run, but it also tells the Fed that firms still have pricing power, which is one reason the hawkish members have argued for a higher policy rate.
July income and spending: the consumer is slowing
The BEA released July personal income and outlays the same morning. Personal income rose $115.1 billion, or 0.4%, and disposable income rose $125.9 billion, or 0.5% [2]. Spending grew only $36.3 billion, or 0.2%, in current dollars, and after inflation real spending was up $1.3 billion, less than 0.1% [2]. Services spending rose $86.2 billion while goods spending fell $49.9 billion [2]. The personal saving rate rose to 3.0% from 2.7% in June [2].
The PCE price index rose 0.2% in July and 3.7% over the year, and core PCE rose 0.2% and 3.3% [2]. Both annual rates were unchanged from June, so the monthly inflation trend has stalled near 0.2%, an annualized pace of about 2.4% [2]. Households are rebuilding savings and cutting goods purchases, which is the textbook response to a period of rising prices and slower hiring.
How Treasury yields reacted
The bond market focused on the price revisions. The 2-year Treasury yield was 4.19% on August 26, 4.20% on August 27 and 4.34% on August 28, according to the U.S. Treasury's daily par yield curve [4]. The 10-year rose from 4.51% to 4.59% over the same three days and the 30-year from 5.17% to 5.22% [4]. A 15 basis point rise in the 2-year yield over two sessions is a clear repricing toward a higher policy rate, and it came after the upward revisions to core PCE and the $400.9 billion profit gain [1][4].
DataPorium's real GDP series records the second-quarter level at $24,269.6 billion in chained dollars, compared with $23,771.0 billion a year earlier, a 2.1% gain over four quarters [5]. Readers can compare GDP, PCE inflation and the funds rate on DataPorium's economic metrics page.
What it means for stocks, bonds and the Fed
- Stocks: A $400.9 billion quarterly profit gain is the strongest earnings backdrop of the year, and it arrived while real growth was only 1.5% [1]. Investors may consider that margins, not volumes, are driving results, and margins are more vulnerable when input costs stop falling.
- Bonds: The 2-year at 4.34% is now well above the 3.75% ceiling of the target range [4]. The market has moved from pricing a hold to pricing at least one hike, and the September meeting will confirm or reject that.
- Consumers: Real spending near zero in July and a saving rate of 3.0% show households pulling back on goods while services hold up [2]. That is a healthy adjustment, not a collapse.
- Policy view: Strong profits with weak real growth is the pattern of an economy where capital is earning well and labor income is growing slowly. The market-oriented answer is more investment and competition, which turn profits into capacity and lower prices, rather than higher taxes on profits, which would reduce the investment that eventually restrains inflation. The fair counterpoint is that a 3.0% saving rate leaves households exposed if profit-driven price increases continue [2].
The second estimate kept growth at 1.5% but raised quarterly core PCE to 3.6% and showed profits jumping $400.9 billion, which pushed the 2-year yield to 4.34% and put a September hike on the table.
Key takeaways
- Q2 2026 real GDP growth was unrevised at 1.5% annualized; Q1 remains 2.1% [1].
- Corporate profits from current production rose $400.9 billion in Q2 after $74.4 billion in Q1 [1].
- Quarterly PCE inflation was revised up to 5.3% and core PCE to 3.6% [1].
- July real consumer spending was flat, the saving rate rose to 3.0%, and PCE inflation held at 3.7% [2].
- The 2-year Treasury yield rose to 4.34% and the 10-year to 4.59% on August 28, 2026 [4].
Frequently asked questions
Was Q2 2026 GDP revised in the second estimate?
No. Real GDP growth stayed at 1.5% annualized because an upward revision to consumer spending was offset by an upward revision to imports [1].
How much did corporate profits rise in the second quarter of 2026?
Corporate profits from current production increased $400.9 billion in Q2 2026, compared with a $74.4 billion increase in Q1, according to the BEA [1].
What was PCE inflation in July 2026?
The PCE price index rose 0.2% in July and 3.7% over the year. Core PCE also rose 0.2% in the month and 3.3% over the year [2].
What is the difference between GDP and GDI?
GDP measures output through spending; GDI measures it through income earned. In Q2 2026 real GDI grew 2.2% versus 1.5% for GDP, and the average of the two was 1.8% [1].
