The second-quarter US GDP rose 3.8%, much more than expected
The US economy’s resurgence in the second quarter has been revised upward once more, with economists suggesting that this momentum has continued into the third quarter, highlighting the strength of the world’s largest economy. The Commerce Department reported on Thursday in its third and final estimate that gross domestic product, the broadest measure of economic output, increased at an annualized rate of 3.8% from April through June. That figure is notably elevated compared to the 3.3% rate indicated in the second estimate, and it surpasses the 3% initially reported. The revision of GDP was influenced significantly by newly available data regarding consumer spending. Personal consumption expenditures increased at an annualized rate of 2.5% in the second quarter, as reported in the third estimate, a significant rise from the second estimate’s 1.6%.
The significant disparity between the initial estimate and the third one is “certainly notable and outside the norm,” Bret Kenwell, US investment analyst at investing platform eToro. “This year’s economic data — especially over the past few months — has been noisy, and economic policy uncertainty has remained elevated throughout 2025,” he stated. “Given the numerous components in the GDP report, it’s understandable that larger-than-anticipated revisions are emerging, especially in a year characterized by increased volatility and conflicting signals.” However, the economic narrative of the second quarter continues to be consistent: Falling imports and US consumers who continued to spend contributed to the rebound during the spring, following a contraction at the beginning of the year when importers built up inventories in anticipation of President Donald Trump’s tariffs, which negatively impacted GDP. The Federal Reserve Bank of Atlanta has projected that GDP maintained a strong momentum in the third quarter, with expectations for third-quarter GDP to come in at a solid 3.3% rate. The government is set to release its initial estimate of third-quarter GDP next month.
“Thursday’s upward GDP revision for the second quarter confirmed that the economy grew at a healthy clip, even as tariff uncertainty reached fever pitch during the quarter,” Paul Stanley stated in an analyst note Thursday. “The US economy is resilient and the strong GDP is another indication that we are not at risk of any kind of recession, even with slowing labor market growth,” he stated. The US labor market is experiencing a slowdown, and consumer sentiment is once again on the decline; however, Americans have yet to reduce their spending habits. That’s crucial because consumer spending is the lifeblood of the US economy, accounting for about two-thirds of economic output. In a surprising turn of events, retail sales, which account for a significant portion of total spending, increased by 0.6% in August compared to the previous month, as reported by the Commerce Department, building on July’s 0.6% rise.
On Friday, the government released more detailed figures on consumer spending for August, encompassing purchases of services, as part of its monthly Personal Consumption Expenditures report. Nonetheless, a labor market that is becoming increasingly fragile presents a risk to the economic engine of America, particularly if layoffs begin to rise. Last week, new applications for unemployment benefits remained relatively low, according to a report. However, filings by federal workers who have been laid off have increased in recent weeks and may continue to rise. In a report new orders for durable goods experienced a robust rebound of 2.9% in August, following two consecutive monthly declines, driven by an increase in new orders for aircraft and parts. Nonetheless, when excluding transportation equipment, new orders for durable goods experienced a more modest increase of 0.4% last month. New orders for non-defense capital goods excluding aircraft — a key gauge of business investment — rose 0.6% in August, a slight decrease from July’s 0.8% gain.
