- The Commerce Department made a significant revision to the preliminary GDP estimate.
- The U.S. economy grew by 3.8% in second quarter, up from an early estimate of 3%.
- Consumer spending, which accounts for two-thirds of U.S. economy, drove the increase.
Continuing a trend of outsized data revisions amid “historically unusual” economic conditions, a Commerce Department update Thursday shows the U.S. economy was running significantly hotter in the second quarter of the year than previously reported.
And the revisions bode well for third quarter performance even as the U.S. employment sector shows signs of broader weakening alongside increasing inflationary pressures.
The Bureau of Economic Analysis’ initial estimate of U.S. gross domestic product, a measure of the value of all goods and services produced in the U.S. over a given time period, came in at 3.0%. But Thursday’s revision, the BEA’s second update to the initial GDP data, found the actual growth rate was 3.8% in April through June of this year.
So, why the larger-than-usual adjustment?
Bret Kenwell, U.S. investment analyst at investing platform eToro, told CNN the big difference between the first and third estimates is “notable and outside the norm.”
“This year’s economic data — especially over the past few months — has been noisy, and economic policy uncertainty has remained elevated throughout 2025,” he said. “With so many moving parts in the GDP report, it’s not surprising that larger-than-expected revisions are showing up, particularly in a year marked by heightened volatility and mixed signals.”
BEA notes updated data on consumer spending, along with a decrease in import volumes, drove the growth number higher following a first quarter that saw an overall decline in U.S. GDP.
Consumer spending
The negative growth rate in the first quarter was mostly attributable to an unprecedented spike in U.S. import traffic, a negative component of the GDP equation, as businesses piled up goods ahead of anticipated increases in tariff fees.
Thursday’s revisions include a significant adjustment to the BEA’s personal consumption expenditure index, a measure of U.S. consumer spending. Growth in that spending rate jumped from the 1.4% preliminary estimate to 2.5% in the latest update. Consumer spending is the primary driver of the U.S. economy, accounting for more than two-thirds of overall GDP.
“Thanks to the mighty consumer,” senior economist Priscilla Thiagamoothy, of BMO Capital Markets, told MarketWatch, the economy ”continues to hold up well.”
Currently, the Federal Reserve Bank of Atlanta is forecasting third quarter GDP to register at a solid 3.3% rate.
No risk-free paths?
Volatile U.S. economic conditions have roiled federal data collection processes, driving massive revisions to base economic metrics beyond the GDP reading, like hiring rates.
In comments following the Federal Reserve’s policy meeting last week, Fed Chairman Jerome Powell said the monetary body was facing a “historically unusual” set of challenges in predicting the direction of the U.S. economy.
At that meeting, the Fed’s Open Market Committee voted 11-1 to cut its benchmark federal funds rate by .25%, the first interest rate adjustment since last December and one aimed at bolstering a slowing jobs sector.
But Powell underscored that the cut could also have negative impacts on inflation, which has hovered well above the Fed’s target annual rate of 2%.
“There are no risk-free paths now,” Powell said at the Sept. 17 press conference. “We have to keep our eye on inflation and at the same time we cannot ignore and must keep our eye on maximum employment. There’s a range of views on what to do but nonetheless we came together today at the meeting and acted with a high degree of unity.”
The Commerce Department is scheduled to release its latest U.S. inflation reading on Friday along with updated consumer spending data.