Gross domestic product grew at an annualized pace of 3% in the second quarter, according to the Bureau of Economic Analysis's advance estimate. Economists surveyed by Bloomberg had expected a 2.6% increase.
The reading comes after a large surge in imports ahead of President Trump's tariff whipsaw caused GDP to contract by 0.5% in the first quarter. The BEA noted that the second quarter bounce back reflected a decrease in imports, which are a subtraction in the calculation of GDP.
But in recent months, economic data has largely been better-than-feared, and recession concerns have eased. The probability investors were putting on a US recession in 2025, as tracked by popular online betting platform Polymarket, was just 17%, down from a peak of 66% on May 1.
The point that must appear front and center in any analysis of the second quarter GDP is that it follows a quarter in which GDP shrank at a 0.5 percent annual rate. This drop was driven by unusual factors " most notably a huge surge in imports that subtracted 4.66 percentage points from growth in the quarter. For this reason, most analysts downplayed the negative growth figure reported for the quarter.
However, the reasons that made the first quarter unusual on the negative side will be making the second quarter unusual on the positive side. Most obviously, we can be certain that there will be a big jump in net exports making a large positive contribution to growth in the quarter. Any honest analysis must average the two quarters together.
Weak Growth in the First Half of 2025
We will see growth somewhat over 2.0 percent in the second quarter. This would ordinarily be fine, but when this growth figure is averaged in with the drop of 0.5 percent in the first quarter, it is exceptionally weak. If the second quarter growth is 2.5 percent, it means the economy grew at an average rate of 1.0 percent in the first half of 2025, a sharp slowing from 2.8 percent rate for the full year of 2024.
cepr.net
Rebound in US economic growth in second quarter masks underlying slowing trend
www.reuters.com
... Summary
- - - Second-quarter GDP increases at 3.0% rate
- - - Decrease in imports drives rebound in growth
- - - Consumer spending rises at 1.4% pace
- - - Measure of underlying growth increases at 1.2% rate
U.S. economic growth rebounded more than expected in the second quarter, but that measurement grossly overstated the economy's health as declining imports accounted for the bulk of the improvement and domestic demand increased at its slowest pace in 2-1/2 years.
Details of the Commerce Department's advance second-quarter gross domestic product report on Wednesday painted a picture of an economy that was losing steam as businesses and households grappled with uncertainty from President Donald Trump's protectionist trade policy, characterized by sweeping tariffs on imports and delays of higher duties to allow countries to negotiate trade deals with the White House.
Consumer spending, the engine of the economy, grew moderately after almost stalling in the January-March quarter. Business investment in equipment slowed sharply following double-digit growth in the prior quarter. Residential investment, which includes homebuilding and house sales via brokers' commissions, contracted for a second straight quarter. ...
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