The U.S. economy grew at a robust 3.0% annualized rate in the second quarter, rebounding from a 0.5% contraction in the prior quarter, according to the Commerce Department’s Bureau of Economic Analysis.
This marked a significant recovery from the first decline in three years.
However, economists caution that the headline figure overstates the economy’s true health.
A sharp drop in imports, the largest since the COVID-19 pandemic, contributed over 5 percentage points to GDP growth, heavily skewing the data.
The second-quarter surge was driven largely by a reversal in trade patterns, following a record goods trade deficit in the first quarter.
Businesses had rushed to import goods ahead of President Donald Trump’s tariffs, inflating the deficit earlier in the year.
In contrast, the second quarter saw the goods trade deficit shrink to its smallest in nearly two years, boosting GDP calculations.
Economists noted that Trump’s protectionist trade policies, including sweeping tariffs, continue to create volatility, complicating efforts to gauge underlying economic strength.
Despite the strong GDP figure, consumer spending grew at a modest 1.4%, an improvement from 0.5% in the first quarter but still lackluster.
Private investment plummeted at a 15.6% annual rate, the steepest decline since the pandemic, driven by businesses reducing inventories built up earlier.
Inventories alone subtracted 3.2 percentage points from growth.
Economists expect subdued growth in the second half, citing persistent trade disruptions and an effective tariff rate among the highest since the 1930s.
The Federal Reserve is anticipated to maintain its benchmark interest rate at 4.25%-4.50% following its latest meeting, resisting pressure to cut rates.