U.S. Economy Rebounds With 3.8% Growth in Second Quarter of 2025
The U.S. economy showed solid momentum in the spring months, with gross domestic product (GDP) expanding at an annualized rate of 3.8% in the second quarter of 2025, according to updated figures from the Bureau of Economic Analysis (BEA).
The result marks a sharp turnaround from the 0.6% contraction in the first quarter.
The stronger reading, up from the previous estimate of 3.3%, was driven mainly by robust consumer spending and lower imports, which improve the GDP calculation. Those gains helped offset declines in business investment and exports.
Consumer Strength and Industry Performance
Revisions revealed that household consumption was healthier than initially reported, particularly in services such as transportation and financial activities. Real final sales to private domestic purchasers, a key measure of underlying demand, rose 2.9% in the quarter, significantly stronger than the 1.9% increase previously estimated.
From an industry perspective, private goods-producing sectors surged 10.2%, while services advanced 3.5%. Government output, however, fell 3.2%, pulling down overall growth.
Inflation and Profits Paint a Mixed Picture
Inflation pressures remained moderate. The price index for gross domestic purchases rose 2.0%, while the Federal Reserve’s preferred measure, the core personal consumption expenditures (PCE) price index excluding food and energy, climbed 2.6%.
Corporate profits were less encouraging, inching up just $6.8 billion in the second quarter after downward revisions, a sign that earnings momentum has softened. Real gross domestic income (GDI) also grew 3.8%, though this was revised lower from prior estimates.
The first quarter was also adjusted, showing GDP declined 0.6% as weaker investment and government spending weighed on activity. Consumer spending helped cushion the downturn, but inflation was notably hotter earlier in the year, with the PCE index running above 3%.
Looking at the broader trend, the U.S. economy has expanded at an average annual rate of 2.4% since 2019, according to the updated national accounts. The BEA emphasized that the revisions reflect its 2025 annual update, which incorporates new source data and methodology adjustments.
The next snapshot of economic activity will come on October 30, when the BEA publishes its advance estimate for third-quarter GDP.
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