GDP Rebounded in Q2 — What That Means
Growth in the second quarter of 2025 registered at 3.3%.
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The federal government shutdown is delaying delivery of federal economic data, including the first estimate Q3 2025 gross domestic product report from the Bureau of Economic Analysis.
Real gross domestic product grew by an annual rate of 3.8% in the second quarter of 2025, according to the third estimate report released on Sept. 25 by the Bureau of Economic Analysis.
GDP was negative in the first quarter of the year. The first estimate pegged second quarter GDP at 3% and the second estimate came in at 3.3%.
The upturn in growth was largely due to a decline in imports — that figure is subtracted in the GDP calculation. It was also due to an increase in consumer spending. Both factors were partly offset by a downturn in investment and exports.
» MORE: Are we in a recession?
What is GDP?
GDP, or gross domestic product, is the market value — in current dollars — of all goods and services produced within the United States in a given period; Real GDP adjusts that measure for inflation. Changes in GDP are expressed on an annualized basis.
Does recent GDP data signal there is trouble ahead?
The second quarter growth bounced back at a rate of 3.8% compared to the previous quarter. Real gross domestic product decreased by an annual rate of 0.5% in the first quarter of 2025, according to the third estimate released on June 26 by the Bureau of Economic Analysis.
Negative growth, or contraction, is generally a red flag that there is a slowdown happening in the economy. It shows that consumers and businesses may be spending less. Two consecutive quarters without growth is the traditional definition of a recession.
The first quarter 2025 drop in GDP is largely due to a surge in imported goods as companies and consumers tried to get ahead of President Donald Trump’s tariffs. That said, imports aren’t produced in the U.S. so they aren’t counted in the same way as other GDP factors like household spending, exports and investments. It’s likely that the negative GDP in March reflected a technicality rather than a sign of distress in the economy.
While the faster rate of GDP growth in the second quarter is a positive development, it’s not a signal that the economy is entirely healthy either. The Q2 growth increase was largely due to a decline in imports (because businesses stockpiled goods during the first quarter) and a boost in consumer spending (likely to get ahead of tariffs). Since the U.S. economy hasn’t felt the impact of tariffs yet, it’s unclear where the economy is headed from here.
Fed projects 1.7% growth for 2025, lower than previous forecast
Recent GDP projections by the FOMC forecasts lower growth for 2025 (1.7%) compared to its December forecast (2.1%), according to the FOMC’s Summary of Economic Projections released after its meeting March18-19
In terms of how the Fed might respond to changes in growth, Federal Reserve Chair Jerome Powell said at an event on April 4, “Inflation is going to be moving up and growth is going to be slowing, but to me it's not clear at this time what the appropriate path for monetary policy would be. We're going to need to wait and see how this plays out before we can start to make those adjustments.”
GDP for the second quarter of 2025
The BEA’s second estimate showed that the U.S. GDP grew faster in the second quarter of 2025 than it did in the first quarter.
In the second quarter — covering April, May and June — real GDP went up by 3.3%, the second estimate shows.
Here’s how the economy grew in recent quarters:
- -0.5% annual rate of growth in Q1 2025
- 2.4% annual rate of growth in Q4 2024.
- 3.1% annual rate of growth in Q3 2024.
- 3% annual rate of growth in Q2 2024.
- 1.6% annual rate of growth in Q1 2024.
- 3.4% annual rate of growth in Q4 2023.
- 4.9% annual rate of growth in Q3 2023.
- 2.1% annual rate of growth in Q2 2023.
- 2.1% annual rate of growth in Q1 2023.
The second estimate for Q2 2025 GDP will be released on Aug. 28.
How did GDP in 2024 compare to recent years?
In 2020, at the beginning of the COVID-19 pandemic, the annual rate of GDP dropped to levels far below even those during the Great Recession, federal data shows. By the end of 2020 and into 2021, GDP rebounded quickly. However, the first two quarters of 2022 showed signs of slowing down before a more robust finish at the end of the year. GDP continued its upward trajectory through 2023 and 2024.
In 2024, the U.S. GDP grew 2.8%, just slightly below the 2.9% increase in 2023. The 2024 increase was primarily due to growth in consumer spending, investment, government spending and exports. Imports, which subtract from GDP, also increased.
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What did people spend money on in Q2 2025?
- Imports declined, driven by a decrease in goods, led by nondurable consumer goods, except food and automotive (mainly medicinal, dental and pharmaceutical preparations, including vitamins). Exports also declined, primarily due to a decrease in goods, led by automotive vehicles, engines and parts.
- Within consumer spending, increases were recorded in both goods and services. Spending went up in health care, food services and accommodations, as well as financial services and insurance. Consumers also purchased motor vehicles and parts and other nondurable goods.
- Business investment declined, largely due to a drop in private inventory investment, including decreases in nondurable goods manufacturing — primarily chemical — and in wholesale trade.
Photo by Justin Sullivan/ Getty Images News via Getty Images
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