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U.S. News

US Economy Soars: How Consumer Spending and Reduced Imports Fuel Fastest Growth in Two Years

U.S. GDP grew 3.8% in Q2, driven by consumer spending. This is faster than earlier estimates, despite labor market concerns.

byEditorial Staff

September 25, 2025, 7:38 PM

Executive Summary

The U.S. economy expanded at an annualized rate of 3.8% in the second quarter, an upward revision from 3.3% and the fastest growth seen in nearly two years.

Robust consumer spending, which rose by 2.5% in the year to the end of June, was the primary driver of the economic expansion, defying earlier estimates and uncertainties including tariffs imposed by President Donald Trump.

The labor market showed mixed signals, with a weak August jobs report contrasted by falling unemployment claims, leading economists to offer varied outlooks on future growth and inflation.

The Story So Far

The context for the U.S. economy’s faster-than-estimated expansion is rooted in an earlier contraction in the first quarter of 2025, which was largely attributed to companies increasing imports in anticipation of tariffs imposed by President Donald Trump. However, the economy has since been propelled by robust and resilient consumer spending, the primary engine of the U.S. economy, even as the labor market presents a mixed picture.

Why This Matters

The U.S. economy’s upwardly revised Q2 growth, driven by robust consumer spending, signals a more resilient economic performance than initially estimated, easing recent anxieties about a potential slowdown. However, despite this strong showing and some positive labor market indicators, economists continue to warn that the cumulative impact of tariffs and broader policy uncertainty could still lead to slower growth and higher inflation in the coming months.

Who Thinks What?

Official government data indicates the U.S. economy expanded at a faster pace than initially estimated in the second quarter, driven by robust consumer spending and a reduction in imports.

Bill Adams, chief economist for Comerica Bank, believes the most recent economic data, including GDP and jobless claims, is “considerably more upbeat” and should alleviate anxieties stemming from the weak August jobs report.

Lydia Boussour, a senior economist at EY-Parthenon, notes that economic momentum remained steady in the first half but cautions that “slower US growth and higher inflation are still on the horizon” due to the impact of tariffs and policy uncertainty.

The U.S. economy expanded at a faster pace than initially estimated in the second quarter of this year, driven by robust consumer spending and a reduction in imports. Gross Domestic Product (GDP), the broadest measure of economic activity, increased at an annualized rate of 3.8% from April through June, an upward revision from the previous estimate of 3.3%.

Economic Growth and Revisions

This revised growth rate marks the fastest pace the U.S. economy has seen in nearly two years, following a contraction earlier in the year. The initial estimate for the second quarter had already indicated strong performance, but updated government data revealed an even more accelerated expansion.

In the first three months of 2025, the U.S. economy experienced a 0.6% contraction. This downturn was attributed to companies increasing imports in anticipation of tariffs imposed by President Donald Trump, which subsequently impacted GDP figures.

Consumer Spending Drives Expansion

A significant factor in the upward revision was the strength of consumer spending, which rose by 2.5% in the year to the end of June. This figure is notably higher than the prior estimate of 1.6% and underscores the resilience of American consumers, who serve as the primary engine of the world’s largest economy, even amid tariffs and broader economic uncertainties.

Recent data from the Commerce Department further supports this trend, showing that retail sales in August increased by 0.6% from the previous month, surpassing market expectations. This sustained spending has defied concerns about a potential economic slowdown.

Labor Market Dynamics

Despite the robust consumer activity, the labor market has presented a mixed picture. Employers added only 22,000 jobs in August, a figure lower than anticipated, and the unemployment rate edged up from 4.2% to 4.3%, according to the Labor Department.

However, more recent data offers a potentially more optimistic view. Initial claims for unemployment insurance fell last week to their lowest level since July, signaling that the job market might not be as weak as other indicators have suggested.

Expert Commentary and Outlook

Economists have offered varied perspectives on the latest data. Bill Adams, chief economist for Comerica Bank, commented that the most recent economic data, including GDP and jobless claims, are “considerably more upbeat than the droopy August jobs report” and “should ease the bout of anxiety kicked off by the weak August jobs report.”

Lydia Boussour, a senior economist at EY-Parthenon, noted that economic momentum remained steady in the first half of the year despite increasing policy headwinds. However, she cautioned that “with the impact of tariffs and policy uncertainty becoming increasingly visible, slower US growth and higher inflation are still on the horizon.”