The US economy grew more than expected in the second quarter. This growth came from increased business investment and a strong bounce back in consumer spending. Meanwhile, weekly jobless claims showed stability. This indicates that the labour market remains steady, even with continuing economic uncertainties.
The Commerce Department revised US GDP growth for the second quarter to 3.3%, up from an initial estimate of 3%. This revision comes on the back of stronger-than-expected business investment, particularly in intellectual property and artificial intelligence, as well as an uptick in consumer spending.
Business investment in equipment also exceeded expectations, growing at a rate of 7.4% from the previous quarter.
While the headline GDP number is encouraging, economists are focusing on the “final sales to private domestic purchasers” figure, which strips out trade and government spending to better gauge underlying economic strength.
This key measure was revised up to a 1.9% growth rate. However, concerns over the impact of tariffs on imports continue to cloud the economic outlook, with some analysts predicting a slowdown in the second half of the year.
In the labour market, the latest data from the Labour Department showed that initial jobless claims for the week ending August 23 fell by 5,000, landing at 229,000.
While this suggests that layoffs are not accelerating, the overall job market remains in a cautious “no-hire, no-fire” mode, partly due to ongoing tariff-related uncertainty. The number of people continuing to receive unemployment benefits also dipped slightly, down to 1.954 million in the week ending August 16.
Despite the positive GDP revision, economists remain cautious about the second half of the year. Growth is expected to slow to around 1.5% in 2025, down from a previously projected 2.8%, largely due to the lingering effects of tariffs.
While business investment in AI and technology is providing some optimism, the trade policies are creating a complex environment for many industries, particularly manufacturers and retailers.