The U.S. economy expanded by 3.0% in the second quarter of 2025, according to preliminary data released by the Bureau of Economic Analysis (BEA). The figure significantly outpaced market expectations of 2.4%, marking a sharp rebound from the −0.5% contraction recorded in Q1.
The stronger-than-expected growth was primarily driven by a sharp drop in imports and resilient consumer spending. However, economists caution that the headline number may overstate underlying strength, as much of the rebound reflects a correction in trade flows rather than broad-based domestic acceleration.
While GDP headline growth accelerated, the final sales to private domestic purchasers a key metric of internal demand rose only 1.2%, highlighting continued fragility in business investment and household confidence.
The BEA noted modest increases in personal consumption expenditures and federal government spending, alongside a decline in private inventory investment. Residential investment remained flat, reflecting the ongoing drag from elevated interest rates and tightening lending conditions.
This report comes just hours before the Federal Reserve’s interest rate decision, with markets closely watching for signals about potential cuts later this year. A 3% GDP print may complicate that narrative, suggesting that the economy retains enough momentum to delay monetary easing unless inflation continues to moderate.
Context & Reaction
- The data points to resilience, but not necessarily broad-based strength
- Analysts expect downward revisions in future estimates due to volatile trade components
- Bond markets have already priced in delayed rate cuts, with the 10-year yield rising above 4.2%
- Equity markets opened flat, balancing the strong GDP against the potential for a more hawkish Fed
source: BEA, MarketWatch, WSJ, Reuters, Bloomberg
