Topline
The U.S. economy bounced back in the second quarter amid an uptick in consumer spending and a decline in imports, as the value of American goods and services increased at a higher rate than expected, according to data released Wednesday by the Commerce Department.
A turnaround marked a reversal from a decline of 0.5% for the first quarter.
Key Facts
Real gross domestic product increased at an annual rate of 3% in the second quarter, according to the Bureau of Economic Analysis, ahead of the Dow Jones consensus of 2.3%.
The latest GDP report follows a decline of 0.5% in the first quarter, the weakest period of economic growth for the U.S. since Q1 in 2022 that was “primarily reflected” by an increase in imports as businesses aimed to get in front of President Donald Trump’s tariffs, and a decrease in government spending, the BEA said.
Consumer spending rose by 1.4% in Q2, above the 0.5% recorded in the first quarter, while exports and imports fell 1.8% and 30.3%, respectively, marking a reversal from a 37.9% jump in the first quarter.
Crucial Quote
Trump lauded the GDP increase on Truth Social, writing the latest figures were “WAY BETTER THAN EXPECTED” and claimed Fed Chair Jerome Powell “MUST NOW LOWER” interest rates.
What To Watch For
The Federal Open Market Committee will announce Wednesday afternoon whether interest rates will be cut, though the Fed is expected to hold rates between 4.25% and 4.5%, where they have sat since December 2024. Jeffrey Roach, chief economist for LPL Financial, suggested in a note Wednesday the GDP data signals the Fed will “likely be in a good place” to cut rates by its September meeting, as consumer spending is expected to “moderate further” in the coming quarters. “We should expect [Powell] and other committee members to prepare investors for a September cut,” Roach wrote.
Key Background
A reversal for the economy follows recession fears and businesses preparing for Trump’s wide-reaching tariffs on U.S. trade partners in the first three months of the year. Negative GDP growth is rare, as a decline has occurred only three times over the last decade, two of which happened as the COVID-19 pandemic froze the global economy in 2020 and once in Q2 2022, when the Fed enacted its first interest rate hike in more than three years as inflation rose to a 40-year high. Consumer sentiment improved in July as Americans expressed fewer concerns about the economy and labor market, as the number of citizens filing for jobless benefits hit a three-month low last week, according to federal data. Inflation rose to 2.7%, however, above the estimated 2.6%, as Trump’s tariffs appeared to be starting to raise prices for consumers.
Further Reading
Source: https://www.forbes.com/sites/tylerroush/2025/07/30/us-economy-rebounded-in-second-quarter-as-gdp-rises-3/