The U.S. economy entered a measurable second quarter recovery with an upturn of 3.8 percent in real GDP growth at an annualized rate. This growth exceeded previous projections and pointed to a rapid rebound. Consumer spending and a decrease in imports are fueling this increase. Altogether, that makes for the quickest pace of economic growth we’ve experienced in almost two years. The new estimate is a significant upward change from the first estimate of 3.3%.
Consumer spending played a central role in driving this growth, increasing by a robust 2.5% in the 12 months through June. This growth represents an incredible comeback from the first estimate of just 1.6%. This miracle among American consumers has lasted even through the headwinds created by the trade war and economic uncertainty that have continued to mount.
The second quarter was a powerhouse. That follows a 0.6% contraction in the first quarter of 2025 and casts doubts on the viability of any purported recovery. Recent data indicates that the economic momentum has remained steady throughout the first half of the year, even amid rising policy headwinds that could impact future growth.
That was underscored last week when initial claims for unemployment insurance fell to their lowest level since July. This coincided with a downward revision of the GDP. This drop is a hopeful sign that the labor market is not quite as bad as the other measures had recently led us to believe.
“The latest economic data are considerably more upbeat than the droopy August jobs report,” – Bill Adams
Adams further noted, “The latest GDP and jobless claims data should ease the bout of anxiety kicked off by the weak August jobs report.” His remarks capture a mood of prudent optimism about the path forward given today’s state of the economy.
Even with this good news, experts are already cautioning that challenges still lie ahead. Lydia Boussour cautioned that “with the impact of tariffs and policy uncertainty becoming increasingly visible, slower U.S. growth and higher inflation are still on the horizon.” Such data highlights the need for ongoing tracking of economic indicators through the rest of the year.
Retail sales jumped by 0.6% in August over the prior month. This increase was larger than anticipated and lifted consumer confidence across the board. With strong consumer spending and encouraging employment data, these are more hopeful times for the U.S. economy. This encouraging trend lays a solid foundation for future progress.