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.

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%.

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.

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%.