After contracting in the first quarter of 2023, the US economy roared back in the second quarter, with that same strength helping counterbalance fears of an impending recession. The Commerce Department claims that the gross domestic product (GDP) skyrocketed at an annualized rate of 3.8% from April through June. That’s an unprecedented jump from lower prior estimates. This is a major upward revision from the 3.3% and 3% rates first reported. That simply reflects a very strong recovery.
Coming into 2023 the US economy faced a myriad of economic challenges. This unanticipated contraction led to alarm bells ringing throughout the economist and policy-making community. The second quarter was a different tale. Pointing the finger at COVID-19 even as consumer spending surged, imports were down—dueling forces that conspired to create deeply inflated economic growth. Second, US consumers continued to spend robustly throughout this period. Their spending had a huge multiplier effect, supercharging the economy’s overall performance.
Falling imports aided the economy’s resurgence. Importers got ready for the tariffs that President Donald Trump slapped on them earlier this year. They built their pipelines to prepare for the onslaught. This preventative action had an immediate negative effect on GDP. The later drop-off in imports produced an unusual setup for rebound in Q2.
The Commerce Department has just released the third and final estimate. Most importantly, it narrates the story of how these factors combined to inflate the GDP growth rate. The updated 3.8% figure is a good reminder that things are running better than anticipated. It underscores the economy’s extraordinary resilience to rebound after a difficult first half of the year.
In short, economists are filled with hope about where the US economy is headed. That optimism would appear to have carried over from the past few months into the third quarter. The upcoming release of the government’s first estimate of third-quarter GDP is anticipated next month, which will provide further insights into the economy’s ongoing recovery.