Topline
The U.S. economy grew at a rate much higher than originally reported in the second quarter as consumer spending rose, according to revised data released Thursday by the Commerce Department, bringing surprise to economists.
One economist noted a revision to economic growth—nearly 1% above initial reports—was “outside the norm.”
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Key Facts
Real gross domestic product increased at an annual rate of 3.8% in the second quarter, up from an earlier revision of 3.3% and initial reports of 3% growth, the Bureau of Economic Analysis reported Thursday, well above Wall Street’s forecasts of real GDP remaining at 3.3%, according to FactSet.
The latest revision is “primarily reflected” by an “acceleration” in consumer spending, as real final sales to domestic purchasers—measuring consumer spending and gross private fixed investment (such as manufacturing equipment and facilities)—increased 2.9% through the second quarter, the BEA said, above earlier revised estimates of 1.9% growth.
Revised economic growth data through the second quarter marks a significant rebound from a decline of 0.5% in the first quarter, the weakest period of economic growth for the U.S. since 2022, as the BEA reported businesses struggled to get in front of President Donald Trump’s tariffs.
Tangent
The Labor Department reported Thursday that jobless claims fell to 218,000 from 232,000 last week, well below a Dow Jones consensus for 235,000.
How Did Analysts Respond To The Revised Gdp Data?
Brett Kenwell, a U.S. investment analyst at eToro, told CNN the nearly 1% increase in real GDP growth is “certainly notable and outside the norm” as this year has been “marked by heightened volatility and mixed signals” through economic data. Bill Adams, Comerica’s chief economist, said in a note Thursday the recent GDP and jobless claims data were “considerably more upbeat” than August’s “droopy” jobs report, which indicated unemployment ticked up as the U.S. added far fewer jobs than expected. Gina Bolvin, president of Bolvin Wealth Management Group, wrote the “economy is doing just fine,” as jobless claims and retail sales were reported stronger than expected, adding, “The old saying, ‘Don’t fight the Fed,’ should be revised to, ‘Don’t fight the U.S. consumer.’”
How Much Will The U.s. Economy Grow In Q3?
The Federal Reserve of Atlanta expects real GDP to grow at an annual rate of 3.3% in the third quarter. The Atlanta Fed’s estimate was recently downgraded from 3.4% after data released from the Census Bureau indicated residential investment growth had decreased.
What To Watch For
The BEA will release personal consumption expenditures (PCE) price index data on Friday. Wall Street expects annual inflation to hit 3% in August, a 0.1% uptick from July, while headline PCE inflation is expected to jump to 2.8% from 2.6%, according to FactSet. The Federal Reserve prefers PCE data for measuring inflation, as the central bank believes it is a better measurement for how Americans are spending their money.
Key Background
The American consumer has become more pessimistic about the U.S. economy in recent weeks, as consumer sentiment fell again in September, according to a University of Michigan report. Inflation has continued rising in recent months as businesses appear to be raising prices in the wake of Trump’s tariffs, while the U.S. job market has declined sharply, with unemployment rising higher than expected in August. The Bureau of Labor Statistics similarly released revised data for the labor market, indicating the U.S. added nearly 1 million fewer jobs than originally reported through the 12 months ending in March. Fed Chair Jerome Powell said Wednesday the central bank had transitioned its concerns from rising inflation to a weakening labor market, which prompted the Fed’s recent decision to cut interest rates. Fed Governor Michelle Bowman noted she was “concerned” the labor market would enter a “precarious phase” and face a “sudden and significant deterioration.”
Further Reading
Source: https://www.forbes.com/sites/tylerroush/2025/09/25/us-economy-stronger-than-reported-through-second-quarter-as-spending-rose/
