US economy grows at fastest pace in nearly two years in Q2 on strong consumer spending
WASHINGTON: The US economy grew faster than first estimated in the second quarter, driven by robust consumer spending and business investment, according to revised government data released on Thursday (Sep 25).
Gross domestic product (GDP) expanded at an annualised rate of 3.8 per cent, the fastest pace since the third quarter of 2023, the Commerce Department said. The figure was revised up from a previous estimate of 3.3 per cent.
The upgrade reflected stronger household consumption and a contraction in the trade deficit as imports slowed. Spending, which accounts for more than two-thirds of US economic activity, was revised up to a 2.5 per cent pace, compared with 1.6 per cent previously.
STRONGER INVESTMENT, TIGHT LABOUR MARKET
Business investment in equipment and intellectual property was also revised higher. Orders for non-defence capital goods excluding aircraft, a proxy for business spending, rose 0.6 per cent in August after a 0.8 per cent gain in July.
The data pointed to underlying resilience despite President Donald Trump’s tariffs and immigration policies, which economists blame for a near-stall in hiring over the summer.
Initial claims for state unemployment benefits fell by 14,000 to 218,000 for the week ended Sep 20, while continuing claims edged down to 1.93 million.
“It is clear that the current level of Fed interest rates is not slowing the economy down and is not hurting the labour market either,” said Christopher Rupkey, chief economist at FWDBONDS.
OUTLOOK REMAINS TEPID
Analysts warned, however, that the strong second-quarter reading was distorted by swings in imports. The economy contracted by 0.6 per cent in the first quarter, revised from a 0.5 per cent drop, after businesses front-loaded imports to beat higher tariffs.
Economists expect growth to cool to about 1.5 per cent in the second half of the year due to trade policy uncertainty. The economy grew 2.8 per cent in 2024.
Financial markets reacted cautiously. US stocks fell on the day as investors judged the stronger GDP print reduced the case for further rate cuts. Treasury yields rose and the dollar firmed against a basket of currencies.
