U.S. Q2 GDP Rises 3.8% from Previous Quarter
Significantly Upgraded from Preliminary Estimate of 3.3%
Trade Deficit Reduction and Increased Consumer Spending Drive Growth
The U.S. economy recorded a growth rate close to 4% in the second quarter of this year, reaching its highest level in two years. The sharp reduction in the goods trade deficit due to a decrease in imports, along with a recovery in consumer spending, led to an economic expansion that exceeded expectations.
According to the U.S. Bureau of Economic Analysis (BEA) under the Department of Commerce on September 25 (local time), the final figure for real gross domestic product (GDP) in the second quarter showed an annualized increase of 3.8% compared to the previous quarter.
This is 0.5 percentage points higher than the previously announced preliminary figure of 3.3%, and it also surpasses the Reuters forecast of 3.3%. The United States releases its GDP growth rate in three stages: advance, preliminary, and final. The figure was revised upward from 3.0% in the advance estimate to 3.3% in the preliminary estimate, and then significantly increased again in the final figure.
On the other hand, the growth rate for the first quarter was revised downward from -0.5% to -0.6%.
The sharp rise in the second quarter's growth rate was mainly driven by improvements in the trade balance and increased consumer spending. Real consumer expenditures, which account for about two-thirds of U.S. GDP, increased by 2.5%, significantly higher than the preliminary figure of 1.6% and the first quarter's 0.5%.
In particular, the growth rate of final sales to private domestic purchasers was also revised upward from 1.9% to 2.9%. The Federal Reserve pays close attention to this indicator as a key measure of demand.
The decrease in imports was a major driver of the improvement in GDP. Companies rapidly increased imports in the first quarter to secure inventory ahead of the U.S. announcement of reciprocal tariffs in April. However, starting in April, the implementation of a 10% base tariff on all global imports led to a reduction in imports, which in turn boosted the growth rate.
The inflation rate was revised up slightly. The core personal consumption expenditures (PCE) price index, which the Federal Reserve considers most important, rose by 2.6%, exceeding the preliminary figure of 2.5%. However, some analysts point out that the sharp fluctuations in imports had a significant impact on the first and second quarter GDP figures, meaning these numbers may not fully reflect the overall health of the economy. As a result, Reuters predicts that, amid ongoing uncertainty over trade policy, growth could slow in the second half of the year, with annual growth possibly remaining around 1.5%.
Nevertheless, there are also expectations that the U.S. economy will continue a moderate growth trend as consumers and businesses adapt to tariff policies. The GDPNow real-time forecast from the Federal Reserve Bank of Atlanta projects a 3.3% growth rate for the third quarter.
As the U.S. economy shows stronger-than-expected growth, uncertainty over the future interest rate path has increased. The Federal Reserve, concerned about a slowdown in the labor market, lowered the benchmark interest rate by 0.25 percentage points to a range of 4.0% to 4.25% on September 17, but Chairman Jerome Powell and other officials have not provided any hints about further cuts.
U.S. Treasury yields have risen slightly. The 10-year yield, which serves as a global benchmark for bond rates, stands at 4.17%, while the 2-year yield, which is sensitive to monetary policy, is at 3.63%, up 2 basis points (1bp=0.01 percentage points) and 3 basis points, respectively, from the previous trading day.
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