Second-quarter growth jumps to 3.8% on strong consumer spending
The United States economy grew more than previously reported in the second quarter, as the Commerce Department’s final estimate showed GDP expanding at an annualized rate of 3.8%, up from an earlier 3.3% figure. This substantial revision was driven by stronger-than-expected consumer spending, with personal consumption increasing by 2.5%, well above the 1.6% previously estimated.
This revision highlights the economic resilience of the US amid a year filled with policy uncertainty and volatile data. According to analysts, the wide gap between the initial and final GDP estimates is unusual and reflects the complexity of interpreting economic signals in 2025. Despite early-year contractions linked to pre-tariff inventory stockpiling, the second-quarter rebound was underpinned by falling imports and robust domestic consumption.
Momentum likely carried into Q3 despite mixed signals
The Federal Reserve Bank of Atlanta projects third-quarter GDP growth at 3.3%, indicating sustained economic momentum. While official third-quarter data will be released next month, current trends suggest another strong performance. This would further challenge recession concerns, even as job growth slows.
Retail sales continue to surprise on the upside, rising 0.6% in both July and August. Consumer spending remains central, representing nearly two-thirds of the US economy. Economists note that even as sentiment cools and labor markets show signs of stress, Americans are not pulling back significantly on purchases.
Labor market stability remains a key risk factor
While unemployment claims remain low, there is a gradual increase in filings from federal workers, hinting at possible vulnerabilities in public sector employment. Any sharp rise in layoffs could weaken household confidence and dampen future spending, putting the broader recovery at risk.
Still, current labor data does not indicate a widespread slowdown. The job market’s relative health continues to support consumer activity, which in turn bolsters GDP growth. The next set of data on personal spending — including services — will provide further clarity on the trajectory heading into the final quarter of the year.
Business investment picks up with strong durable goods orders
In another positive sign, new orders for durable goods rose 2.9% in August after two months of declines, fueled largely by demand for aircraft and related parts. Core capital goods orders — a key indicator of business investment — also rose 0.6%, signaling that firms are still spending despite higher borrowing costs and economic uncertainty.
The modest 0.4% gain in durable goods orders excluding transportation points to continued but cautious optimism among businesses. Equipment upgrades and strategic investments are helping sustain momentum, even if confidence remains tempered by global uncertainties and domestic policy shifts.
