US Economy Grew at 3% Rate in Q2

The U.S. economy grew at a much stronger-than-expected pace in the second quarter, powered by a turnaround in the trade balance and renewed consumer strength, the Commerce Department reported Wednesday.

Gross domestic product, a sum of goods and services activity across the sprawling U.S. economy, jumped 3% for the April through June period, according to figures adjusted for seasonality and inflation.

That topped the Dow Jones estimate for 2.3% and helped reverse a decline of 0.5% for the first quarter that came largely due to a huge drop in imports, which subtract from the total, as well as weak consumer spending amid tariff concerns.

Financial markets reacted little to the report, with stock index futures mixed and Treasury yields higher.

“The word of the summer for the economy is ‘resilient,’” said Heather Long, chief economist at Navy Federal Credit Union. “The consumer is hanging in there, but still on edge until the trade deals are done.”

The period reported Wednesday includes President Donald Trump’s April 2 “liberation day” tariff announcement. Imports had jumped in the first quarter as companies sought to get ahead of the announcement.

Over the past three months, Trump has been engaged in multiple rounds of saber-rattling and often intense negotiations with U.S. trading partners that have jangled nerves but nonetheless coincided with a subdued but solid pace of economic growth.

The talks have largely resulted in tariffs well above where they were at the beginning of the year but not as severe as initially proposed.

Consumer spending rose 1.4% in the second quarter, better than the 0.5% in the prior period. While exports declined 1.8% during the period, imports fell 30.3%, reversing a 37.9% surge in Q1.

The GDP tally showed strength across key areas of the economy, as well as evidence that inflation is ebbing though not eradicated.

The personal consumption expenditures price index, the Federal Reserve’s key inflation metric, showed a gain of 2.1% for the quarter, just above the central bank’s 2% target. Core PCE inflation, which the Fed considers a better gauge for longer-run trends as it excludes volatile food and energy prices, increased 2.5%. The respective numbers for the first quarter were 3.7% and 3.5%.

The Fed meets later Wednesday and is expected to hold its key overnight borrowing rate steady in a 4.25%-4.5% range, where it has been since December.

Trump responded to the GDP report with a fresh demand for the Federal Reserve to lower interest rates.

“2Q GDP JUST OUT: 3%, WAY BETTER THAN EXPECTED!” Trump posted on Truth Social. Using his nickname for Fed Chair Jerome Powell, the president added ”‘Too Late’ MUST NOW LOWER THE RATE. No Inflation! Let people buy, and refinance, their homes!”

There were some signs of a slowdown in the report.

Final sales to private domestic purchasers, a metric that Fed watches closely as a demand indicator, rose just 1.2%, down from the 1.9% increase in Q1 and the slowest gain since the fourth quarter of 2022.

Trump has been complaining about high mortgage rates, which have held back the housing market. Residential investment fell 4.6% in Q2.

At the same time, GDP posted its strong rise without help from government spending. Federal outlays declined 3.7%, coming off a 4.6% drop in the first quarter. State and local government spending rose 3%.