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Economic Data Release

Q2CY25 US GDP 3RD ESTIMATE IS A STRONG PRINT

ADMIN || 26th September 2025

Inflation-adjusted gross domestic product, which measures the value of goods and services produced in the US, increased at a revised 3.8% annualized pace in the 3rd estimate of Q2CY25GDP against the 3.3% pace in the 2nd estimate. This compares against the -.6% for Q1CY25.

The strong increase in Q2 real GDP is driven by a sharp drop in imports, reversing the import surge that occurred in Q1 before tariffs came into effect. That has not changed with the revisions to real GDP. But what has changed substantially is the upward revision to consumer spending from 1.6% to 2.5%. This was driven by services spending revised up to 2.6% from 1.2%.

Private final domestic demand (which removes the volatility associated with trade, inventories and government spending) had previously slowed to 1.2% in Q1 and remained softer at 1.9% in Q2. But after these revisions it is now reported to have accelerated to 2.9% in Q2.

The release also included annual revisions to real GDP based on other benchmark data. Q2 and Q3 2024 real GDP growth was revised stronger but Q4 was revised down from 2.4% to 1.9%.

Large upward revisions to consumer spending (and by extension final private domestic demand) in Q2 make the slowdown in Q1 look less persistent. The underlying pace of growth as measured by final private domestic demand had slowed in unrevised data from around 3% last year to sub-2% this year. But the substantial upward revision to consumer services spending in Q2 now makes Q1 look more like an outlier amongst a still strong trend.

The latest report also included updated figures on corporate profits, which rose 0.2% in the second quarter, much lower than initially projected. That aligns with other data which suggest companies have so far largely shielded US consumers from price hikes due to tariffs implying that the tariff pass-through has been slower and smaller than previously thought.

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