The United States economy rebounded in the second quarter of 2025, expanding at an annual rate of 3%, according to the Commerce Department’s report released Wednesday. The growth marks a sharp reversal from the 0.5% contraction recorded in the first quarter.
The Q2 rebound was largely driven by a sharp drop in imports after a surge in the previous quarter, when businesses stockpiled goods ahead of anticipated tariff hikes. Consumer spending, the largest component of economic activity, also rose by 1.4% during the quarter.
However, the expansion was partially offset by declines in business and residential investment and a slowdown in exports. State and local government spending increased, helping to sustain the overall positive momentum.
Estimates from the Atlanta Federal Reserve’s GDPNow model suggest continued support for growth from personal consumption, government outlays, and investment in intellectual property. Imports were estimated to have fallen nearly 25%, while exports declined at a slower pace, leading to a net positive contribution from trade.
Real final sales to private domestic purchasers — a key measure of private demand — rose 1.2% in Q2, down from 1.9% in the previous quarter.
Inflation pressures appeared to ease during the period. The price index for gross domestic purchases increased by 1.9%, compared to 3.4% in Q1. The personal consumption expenditures (PCE) price index rose 2.1%, while the core PCE, excluding food and energy, climbed 2.5%, down from 3.5% in Q1.
Despite the stronger-than-expected GDP figures, the Federal Reserve has trimmed its full-year growth forecast for 2025 to 1.4%, down from 1.7% projected in March.
On the labor front, private businesses added 104,000 jobs in July — the strongest increase since March and exceeding forecasts of a 75,000 gain. This followed a revised loss of 23,000 jobs in June, suggesting renewed momentum in the job market.
Gains were led by the service sector, with leisure and hospitality adding 46,000 jobs, financial activities 28,000, and trade, transportation, and utilities 18,000. However, education and health services lost 38,000 jobs.
In the goods-producing sector, employment grew by 31,000, bolstered by construction (+15,000), natural resources and mining (+9,000), and manufacturing (+7,000).
Meanwhile, housing activity showed signs of cooling. Pending home sales fell by 0.8% in May, underperforming expectations for a 0.3% rise and reversing part of the 1.8% increase in April.
