| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| Quarter over Quarter - Annual Rate | 3.1% | 3.0% to 3.2% | 3.3% | 3.0% |
| Personal Consumption Expenditures - Annual Rate | 1.4% | 1.4% to 1.5% | 1.6% | 1.4% |
Highlights
The second estimate of second quarter GDP is revised two-tenths higher to up 3.3 percent. The revision mainly reflects slightly stronger personal consumption expenditures and less weakness in gross investment. However, the GDP increase for the second quarter is mostly from net exports where the widening in the international trade deficit in the first quarter was followed by a narrowing in the second quarter. Overall consumer spending has slowed significantly in 2025 after some sharp increases in late 2024 when demand for nondurable goods peaked in anticipation of higher prices in the future due to tariffs. Investment by business in equipment was stronger in the first quarter as these assessed the impact of the actual policies after the new US president was sworn in.
Personal consumption expenditures are up 1.6 percent in the second quarter (previously up 1.4 percent), higher than up 0.5 percent in the first quarter but below up 4.0 percent in the fourth quarter 2024. Spending on durable goods is revised down to up 2.6 percent (previously up 3.7 percent) while nondurables spending is revised higher to up 2.3 percent (previously up 1.3 percent). Spending on services only slightly revised at up 1.2 percent (previously up 1.1 percent). Personal consumption expenditures have the softest gain since up 1.0 percent in the second quarter 2023.
Government consumption expenditures are down 0.2 in the second quarter (previously up 0.4 percent) after declining 0.6 percent in the first quarter.
Gross investment is down 13.8 percent in the second quarter (previously down 15.6 percent) after rising 23.8 percent in the first quarter. Nonresidential fixed investment is up 5.7 percent in the second quarter (previously up 1.9 percent) after up 7.6 percent in the first quarter. Residential investment is down 4.7 percent in the second quarter (previously down 4.6 percent) after down 1.3 percent in the first quarter. Businesses are finding opportunities to invest in equipment when there is a pause before higher tariffs are implemented during periods of negotiation. New home construction remains weak as demand for new homes declines with more existing units on the market and few homebuyers willing to take out a mortgage at current rates.
Net exports make the largest contribution to GDP growth in the second quarter (4.95) with a narrowing to minus $869.4 billion (previously minus $872.4 billion) after minus $1245.1 billion in the first quarter. There was a significant influx of imports in the first quarte to get ahead of higher costs related to tariffs that has since died down. Conversely, the change in private inventories made a negative contribution to growth (minus 3.29) as the build up in inventories in the first quarter was drawn down in the second quarter. The change in private inventories is minus $39.9 billion in the second quarter (previously minus $29.7 billion) after rising $207.0 in the first quarter.
Note that the BEA will release the annual revisions for 2025 on Thursday, September 25 at 8:30 ET.
Personal consumption expenditures are up 1.6 percent in the second quarter (previously up 1.4 percent), higher than up 0.5 percent in the first quarter but below up 4.0 percent in the fourth quarter 2024. Spending on durable goods is revised down to up 2.6 percent (previously up 3.7 percent) while nondurables spending is revised higher to up 2.3 percent (previously up 1.3 percent). Spending on services only slightly revised at up 1.2 percent (previously up 1.1 percent). Personal consumption expenditures have the softest gain since up 1.0 percent in the second quarter 2023.
Government consumption expenditures are down 0.2 in the second quarter (previously up 0.4 percent) after declining 0.6 percent in the first quarter.
Gross investment is down 13.8 percent in the second quarter (previously down 15.6 percent) after rising 23.8 percent in the first quarter. Nonresidential fixed investment is up 5.7 percent in the second quarter (previously up 1.9 percent) after up 7.6 percent in the first quarter. Residential investment is down 4.7 percent in the second quarter (previously down 4.6 percent) after down 1.3 percent in the first quarter. Businesses are finding opportunities to invest in equipment when there is a pause before higher tariffs are implemented during periods of negotiation. New home construction remains weak as demand for new homes declines with more existing units on the market and few homebuyers willing to take out a mortgage at current rates.
Net exports make the largest contribution to GDP growth in the second quarter (4.95) with a narrowing to minus $869.4 billion (previously minus $872.4 billion) after minus $1245.1 billion in the first quarter. There was a significant influx of imports in the first quarte to get ahead of higher costs related to tariffs that has since died down. Conversely, the change in private inventories made a negative contribution to growth (minus 3.29) as the build up in inventories in the first quarter was drawn down in the second quarter. The change in private inventories is minus $39.9 billion in the second quarter (previously minus $29.7 billion) after rising $207.0 in the first quarter.
Note that the BEA will release the annual revisions for 2025 on Thursday, September 25 at 8:30 ET.
Market Consensus Before Announcement
The consensus sees GDP revised up marginally to show a 3.1 percent growth rate in Q2 from the 3.0 percent initial report. Personal consumption expected unrevised at 1.4 percent.
Definition
Gross Domestic Product represents the total value of the country's production during the period and consists of the purchases of domestically-produced goods and services by individuals, businesses, foreigners and government entities. Data are available in nominal and real (inflation-adjusted) dollars, as well as in index form. Economists and market players always monitor the real growth rates generated by the GDP quantity index or the real dollar value. The quantity index measures inflation-adjusted activity, but we are more accustomed to looking at dollar values.
Household purchases are counted in personal consumption expenditures -- durable goods (such as furniture and cars), nondurable goods (such as clothing and food) and services (such as banking, education and transportation). Private housing purchases are classified as residential investment. Businesses invest in nonresidential structures, durable equipment and computer software. Inventories at all stages of production are counted as investment. Only inventory changes, not levels, are added to GDP.
Net exports equal the sum of exports less imports. Exports are the purchases by foreigners of goods and services produced in the United States. Imports represent domestic purchases of foreign-produced goods and services and must be deducted from the calculation of GDP. Government purchases of goods and services are the compensation of government employees and purchases from businesses and abroad. Data show the portion attributed to consumption and investment. Government outlays for transfer payments or interest payments are not included in GDP.
The GDP price index is a comprehensive indicator of inflation. It is typically lower than the consumer price index because investment goods (which are in the GDP price index but not the CPI) tend to have lower rates of inflation than consumer goods and services. Note that contributions of each component, as averaged over the prior year, are tracked in the table below (components do not exactly sum to total due to chain-weighted methodology). Consumption expenditures, otherwise known as consumer spending, has over history been steadily making up an increasing share of GDP.
Household purchases are counted in personal consumption expenditures -- durable goods (such as furniture and cars), nondurable goods (such as clothing and food) and services (such as banking, education and transportation). Private housing purchases are classified as residential investment. Businesses invest in nonresidential structures, durable equipment and computer software. Inventories at all stages of production are counted as investment. Only inventory changes, not levels, are added to GDP.
Net exports equal the sum of exports less imports. Exports are the purchases by foreigners of goods and services produced in the United States. Imports represent domestic purchases of foreign-produced goods and services and must be deducted from the calculation of GDP. Government purchases of goods and services are the compensation of government employees and purchases from businesses and abroad. Data show the portion attributed to consumption and investment. Government outlays for transfer payments or interest payments are not included in GDP.
The GDP price index is a comprehensive indicator of inflation. It is typically lower than the consumer price index because investment goods (which are in the GDP price index but not the CPI) tend to have lower rates of inflation than consumer goods and services. Note that contributions of each component, as averaged over the prior year, are tracked in the table below (components do not exactly sum to total due to chain-weighted methodology). Consumption expenditures, otherwise known as consumer spending, has over history been steadily making up an increasing share of GDP.
Description
GDP is the all-inclusive measure of economic activity. Investors need to closely track the economy because it usually dictates how investments will perform. Investors in the stock market like to see healthy economic growth because robust business activity translates to higher corporate profits. Bond investors are more highly sensitive to inflation and robust economic activity could potentially pave the road to inflation. By tracking economic data such as GDP, investors will know what the economic backdrop is for these markets and their portfolios.
The GDP report contains a treasure-trove of information which not only paints an image of the overall economy, but tells investors about important trends within the big picture. GDP components such as consumer spending, business and residential investment, and price (inflation) indexes illuminate the economy's undercurrents, which can translate to investment opportunities and guidance in managing a portfolio.
Importance
Gross domestic product is the country's most comprehensive economic scorecard.
Interpretation
When gross domestic product expands more (less) rapidly that its potential, bond prices fall (rise). Healthy GDP growth usually translates into strong corporate earnings, which bode well for the stock market.
The four major categories of GDP -- personal consumption expenditures, investment, net exports and government -- all reveal important information about the economy and should be monitored separately. One can thus determine the strengths and weaknesses of the economy in order to assess alternatives and make appropriate financial investment decisions.
Economists and financial market participants monitor final sales -- GDP less the change in business inventories. When final sales are growing faster than inventories, this points to increases in production in months ahead. Conversely, when final sales are growing more slowly than inventories, they signal a slowdown in production.
It is useful to distinguish between private demand versus growth in government expenditures. Market players discount growth in the government sector because it depends on fiscal policy rather than economic conditions.
Market participants view increased expenditures on investment favorably because they expand the productive capacity of the country. This means that we can produce more without inciting inflationary pressures.
Net exports are a drag on total GDP because the United States regularly imports more than it exports, that is, net exports are in deficit. When the net export deficit becomes less negative, it adds to growth because a smaller amount is subtracted from GDP. When the deficit widens, it subtracts even more from GDP.
Gross domestic product is subject to some quarterly volatility, so it is appropriate to follow year-over-year percent changes, to smooth out this variation.
The GDP report contains a treasure-trove of information which not only paints an image of the overall economy, but tells investors about important trends within the big picture. GDP components such as consumer spending, business and residential investment, and price (inflation) indexes illuminate the economy's undercurrents, which can translate to investment opportunities and guidance in managing a portfolio.
Importance
Gross domestic product is the country's most comprehensive economic scorecard.
Interpretation
When gross domestic product expands more (less) rapidly that its potential, bond prices fall (rise). Healthy GDP growth usually translates into strong corporate earnings, which bode well for the stock market.
The four major categories of GDP -- personal consumption expenditures, investment, net exports and government -- all reveal important information about the economy and should be monitored separately. One can thus determine the strengths and weaknesses of the economy in order to assess alternatives and make appropriate financial investment decisions.
Economists and financial market participants monitor final sales -- GDP less the change in business inventories. When final sales are growing faster than inventories, this points to increases in production in months ahead. Conversely, when final sales are growing more slowly than inventories, they signal a slowdown in production.
It is useful to distinguish between private demand versus growth in government expenditures. Market players discount growth in the government sector because it depends on fiscal policy rather than economic conditions.
Market participants view increased expenditures on investment favorably because they expand the productive capacity of the country. This means that we can produce more without inciting inflationary pressures.
Net exports are a drag on total GDP because the United States regularly imports more than it exports, that is, net exports are in deficit. When the net export deficit becomes less negative, it adds to growth because a smaller amount is subtracted from GDP. When the deficit widens, it subtracts even more from GDP.
Gross domestic product is subject to some quarterly volatility, so it is appropriate to follow year-over-year percent changes, to smooth out this variation.
