A shopper holds Macy’s bags outside the company’s flagship store in the Herald Square neighborhood of New York, July 15, 2025.
Alan Chin | Bloomberg | Getty Images
The U.S. economy grew at a pace that was faster than expected in the second quarter as consumers and businesses held up against tariff volatility.
Gross domestic product rose at a 3.3% annualized pace in the April-through-June period, the Commerce Department reported Thursday in its second estimate for the most encompassing measure of economic activity. The reading was better than an initial 3.0% estimate as well as the 3.1% Dow Jones consensus forecast.
Consumer spending, which rose by 1.6% compared with an initial 1.4% estimate, helped push the number higher.
Importantly, a measure called final sales to private domestic purchasers jumped 1.9%, up from the previous figure of 1.2%. Federal Reserve officials watch that metric closely as an indication of demand and sales that focuses on activity within U.S. borders, an especially important measure considering the uncertain impact of President Donald Trump’s tariffs.
The GDP number also reflected the unusual impact of the tariffs as they related to trade numbers.
Imports, which subtract from GDP, tumbled 29.8% in the quarter after companies stockpiled ahead of Trump’s April 2 “liberation day” announcement. The figure was a bit less than the previous estimate of 30.3%.
At the same time, exports, which add to GDP, fell by 1.3%, compared with the previous estimate of -1.8%. Taking the figures together, net exports added nearly 5 percentage points to the Q2 total.
For the first half of the year, GDP has grown about 2.1%, or an average of a little more than 1% per quarter. The economy contracted 0.5% in the first quarter, largely due to the impact of the import rush.
“The good news is consumption came in higher than previously thought. Americans are continuing to spend despite the tariffs and uncertainty, albeit at a slower pace than past years,” said Heather Long, chief economist at Navy Federal Credit Union. “Going forward, the economy is likely to stay in this slower speed mode with spending and growth around 1.5% as the tariffs become more visible to American consumers.”
With the first months’ data mostly in the books, the economy is growing at a 2.2% pace in the third quarter, according to the Atlanta Fed’s GDPNow measure.
Inflation-related estimates were little changed from the initial reading. Core personal consumption expenditures prices, which exclude the volatile food and energy categories, rose 2.5%, unchanged from the prior figure, while the headline PCE price index edged lower to 2%, in line with the Fed’s inflation goal.