U.S Economy Expands by 3% in Second Quarter
The U.S. economy grew in the second quarter of 2025 after a slowdown earlier in the year. The nation’s gross domestic product — the broadest measure of economic activity — grew at an annual rate of 3% in April, May and June, according to a report Wednesday from the Commerce Department.
That’s a turnaround from the three previous months when GDP contracted at a rate of 0.5%. The expansion primarily reflected a decrease in imports, following a surge in Q1, when businesses and consumers rushed to stockpile goods ahead of expected price increases following a series of tariff announcements.
Consumer spending also went up. These movements were partly offset by decreases in investment and exports. Consumer spending, which is the biggest driver of economic activity, rose at an annual rate of 1.4%.
Business and residential investment were down during the quarter, while spending by state and local governments rose. According to the Atlanta Fed GDPNow estimate, second-quarter growth is expected to be supported by personal consumption, government spending, and investment in intellectual property.
In addition, imports likely sank nearly 25% and exports are seen falling much less, leaving the contribution from net trade positive. On the other hand, investment in residential and non-residential structures, along with equipment, is expected to drag on growth.
Real final sales to private domestic purchasers, the sum of consumer spending and gross private fixed investment, increased 1.2 percent in the second quarter, compared with an increase of 1.9 percent in the first quarter.
The price index for gross domestic purchases increased 1.9 percent in the second quarter, compared with an increase of 3.4 percent in the first quarter. The personal consumption expenditures (PCE) price index increased 2.1 percent, compared with an increase of 3.7 percent. Excluding food and energy prices, the PCE price index increased 2.5 percent, compared with an increase of 3.5 percent.
In its June projections, the Fed lowered its US GDP growth forecast for 2025 to 1.4%, down from 1.7% in March. Private businesses in the United States added 104,000 jobs in July 2025, the strongest gain since March and well above market expectations of a 75,000 increase.
The report followed a downwardly revised loss of 23,000 jobs in June, signaling a rebound in labor market momentum. The service-providing sector contributed 74,000 jobs, led by strong gains in leisure and hospitality (+46,000), financial activities (+28,000), and trade, transportation, and utilities (+18,000).
However, education and health services posted a sharp decline, shedding 38,000 jobs. Meanwhile, the goods-producing sector added 31,000 jobs, supported by growth in construction (+15,000), natural resources and mining (+9,000), and manufacturing (+7,000).
Pending home sales in the United States fell by 0.8% from the previous month in May of 2025, missing market expectations of a 0.3% increase and after a 1.8% rise in April. #U.S Economy Expands by 3% in Second Quarter Energy Prices, FX Stability Drive Disinflation, Cardoso Says
