The U.S. economy expanded at an unexpectedly robust pace of 3.8% between April and June, according to revised government data released Thursday, surpassing earlier projections and signaling resilience amid trade tensions and financial market volatility. n nGross domestic product (GDP), which measures the total value of goods and services produced, rebounded sharply from a 0.6% contraction in the first quarter, as reported by the Commerce Department. The initial estimate for the second quarter had been 3.3%, and analysts had anticipated no change in that figure. n nThe first-quarter decline—the first economic contraction in three years—was primarily driven by a spike in imports, which subtract from GDP calculations. Businesses rushed to bring in foreign goods ahead of anticipated tariffs under President Donald Trump’s trade policies. This trend reversed in the second quarter: imports fell at an annual rate of 29.3%, contributing more than five percentage points to growth. n nConsumer spending, a key engine of the economy, increased at a 2.5% annual pace, up from 0.6% in the previous quarter and significantly higher than the previously estimated 1.6%. Spending on services rose at a 2.6% rate, more than double the earlier estimate of 1.2%. n n”The American consumer proved far more resilient than expected, even amid stock market declines and uncertainty over trade policy,” said Heather Long, chief economist at Navy Federal Credit Union, in a social media post. n nA measure of underlying economic momentum—excluding volatile components like inventories, exports, and government spending—grew at 2.9% in the second quarter, up from 1.9% in the first quarter and above prior estimates. This indicator includes private consumption and investment, offering a clearer picture of sustainable growth. n nHowever, not all sectors performed strongly. Private investment declined, with residential investment dropping 5.1%. Falling business inventories subtracted over 3.4 percentage points from second-quarter growth. n nFederal government spending also contracted, decreasing at a 5.3% annual rate, following a 5.6% drop in the first quarter. n nStephen Stanley, chief U.S. economist at Santander, observed that GDP growth averaged 1.6% in the first half of 2025, with consumer spending averaging 1.5%. “Not spectacular, but notably better than first thought,” he remarked. n nSince returning to office, Trump has shifted away from decades of pro-trade policies, imposing double-digit tariffs on imports from nearly all countries and targeting specific goods like steel, aluminum, and automobiles. He views these levies as tools to revive domestic manufacturing and offset the cost of sweeping tax cuts enacted on July 4. n nYet many economists argue that tariffs burden the economy by increasing prices and reducing efficiency among protected industries. They emphasize that importers in the U.S. bear the cost and often pass it on to consumers, contributing to inflationary pressures—though the actual impact so far has been limited. n nThe erratic rollout of these trade measures—announced, suspended, and reintroduced without clear patterns—has created confusion for businesses, contributing to a slowdown in hiring. n nBetween 2021 and 2023, the economy added around 400,000 jobs per month during the post-pandemic recovery. Since then, employment growth has sharply decelerated. Revisions earlier this month revealed 911,000 fewer jobs created than originally reported over the 12 months ending in March, reducing the average monthly gain to under 71,000 instead of 147,000. Job creation since March has averaged only 53,000 per month. n nThe Labor Department is expected to report on October 3 that just 43,000 positions were added in September, though the unemployment rate likely remained low at 4.3%, according to FactSet forecasts. n nIn response to labor market weakness, the Federal Reserve cut its benchmark interest rate last week for the first time since December, signaling expectations of two additional reductions this year. However, the stronger-than-expected GDP data may reduce the urgency for further easing, despite pressure from Trump to lower rates. Fed officials will closely monitor the upcoming personal consumption expenditures (PCE) price index, their preferred inflation metric, set for release Friday. n nThursday’s report marks the final revision of second-quarter growth. The Commerce Department will issue its first estimate for July–September on October 30. Current projections suggest growth will slow to 1.5% in the third quarter. n
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US economy expanded at a surprising 3.8% pace in significant upgrade of second quarter growth
WASHINGTON (AP) — An uptick in consumer spending helped the U.S. economy expand at a surprising 3.8% from April through June, the government reported in a dramatic upgrade of its previous estimate of second-quarter growth. n nU.S. gross domestic product — the nation’s output of goods and services — rebounded in the spring from a 0.6% first-quarter drop caused by fallout from President Donald Trump’s trade wars, the Commerce Department said Thursday. The department had previously estimated second-quarter growth at 3.3%, and forecasters had expected a repeat of that figure. n nThe first-quarter GDP drop, the first retreat of the U.S. economy in three years, was mainly caused by a surge in imports — which are subtracted from GDP — as businesses hurried to bring in foreign goods before Trump could impose sweeping taxes on them. That trend reversed as expected in the second quarter: Imports fell at a 29.3% pace, boosting April-June growth by more than 5 percentage points. n nConsumer spending rose at a 2.5% pace, up from 0.6% in the first quarter and well above the 1.6% the government previously estimated. Spending on services advanced at a 2.6% annual pace, more than double the government’s previous estimate of 1.2%. n n”The U.S. consumer remained a lot stronger than many thought, even in the midst of a stock market sell-off and a lot of trade uncertainty,” Heather Long, chief economist at Navy Federal Credit Union, posted on social media. n nA category within the GDP data that measures the economy’s underlying strength came in stronger than previously reported as well, growing 2.9% from April-June, up from 1.9% in the first quarter and in the government’s previous estimate. This category includes consumer spending and private investment, but excludes volatile items like exports, inventories and government spending. n nBut private investment fell, including a 5.1% drop in residential investment. Declining business inventories took more than 3.4 percentage points off second-quarter growth. n nSpending and investment by the federal government fell at a 5.3% annual pace on top of a 5.6% drop in the first quarter. n nStephen Stanley, chief U.S. economist at Santander, noted that GDP growth averaged 1.6% in the first half of 2025 and consumer spending 1.5% — “not great but much better than initially thought.’’ n nSince returning to the White House, Trump has overturned decades of U.S. policy in support of freer trade. He’s slapped double-digit taxes — tariffs — on imports from almost every country on earth and targeted specific products for tariffs, too, including steel, aluminum and autos. n nTrump sees tariffs as a way to protect American industry, lure factories back to the United States and to help pay for the massive tax cuts he signed into law July 4. n nBut mainstream economists — whose views Trump and his advisers reject — say that his tariffs will damage the economy, raising costs and making protected U.S. companies less efficient. They note that tariffs are paid by importers in the United States, who try to pass along the cost to their customers via higher prices. Therefore, tariffs can be inflationary — though their impact on prices so far has been modest. n nThe unpredictable way that Trump has imposed the tariffs — announcing and suspending them, then coming up with new ones — has left businesses bewildered, contributing to a sharp deceleration in hiring. n nFrom 2021 through 2023, the United States added an impressive 400,000 jobs a month as the economy bounded back from COVID-19 lockdowns. Since then, hiring has stalled, partly because of trade policy uncertainty and partly because of the lingering effects of 11 interest rate hikes by the Federal Reserve’s inflation fighters in 2022 and 2023. n nLabor Department revisions earlier this month showed that the economy created 911,000 fewer jobs than originally reported in the year that ended in March. That meant that employers added an average of fewer than 71,000 new jobs a month over that period, not the 147,000 first reported. Since March, job creation has slowed even more — to an average 53,000 a month. n nOn Oct. 3, the Labor Department is expected to report that employers added just 43,000 jobs in September, though unemployment likely stayed at a low 4.3%, according to forecasters surveyed by the data firm FactSet. n nSeeking to bolster the job market, the Fed last week cut its benchmark interest rate for the first time since December and signaled that it expected two more cuts this year. But the surprisingly strong second-quarter GDP growth may give the central bank less reason to cut rates — despite intense pressure from Trump to do so. Fed officials will be watching even more closely than unusual when their favorite inflation gauge — the Commerce Department’s personal consumption expenditures (PCE) price index — comes out Friday. n nThursday’s GDP report was Commerce Department’s third and final look at second-quarter economic growth. It will release its initial estimate of July-September growth on Oct. 30. n nForecasters surveyed by the data firm FactSet currently expect the GDP growth to slow to an annual pace of just 1.5% in the third quarter.