• The US economy grew at an annualized rate of 3.3% in the second quarter, surpassing the consensus forecast of 3.1%.
  • The headline figure was heavily boosted by a sharp decline in imports, which are subtracted from GDP, masking softer underlying domestic demand.
  • Despite the robust print, core PCE inflation accelerated to 2.5%, and analysts warn growth is likely to moderate in the second half of the year amid persistent policy uncertainty.

The US economy’s rebound in the second quarter was even stronger than anticipated, though the details reveal an expansion built on a fragile foundation. According to the preliminary estimate, real gross domestic product increased at an annualized rate of 3.3%, edging out economist expectations. This marks a dramatic reversal from the first quarter’s 0.5% contraction.

Driving the surprisingly strong headline number was a massive swing in the net exports component, fueled by a sharp decline in imports. As imports are subtracted from the GDP calculation, their pullback provided a significant mechanical boost to the final figure. This dynamic is widely seen as a partial reversal of import surges in prior quarters, which were triggered by businesses stockpiling goods ahead of anticipated tariff-related price hikes.

Beneath the volatile trade data, the picture of domestic demand was more muted. Consumer spending did accelerate to 1.4%, a notable improvement from Q1’s 0.5%, led primarily by goods purchases. Government expenditure also saw a modest rebound. However, fixed investment and exports both declined, with notable contractions in structures and housing investment. A key measure of underlying domestic strength—real final sales to private domestic purchasers—grew a more modest 1.2%.

“The headline is a bit of an economic mirage,” said one economist familiar with the data, who asked not to be named as the report was just published. “The underlying momentum is softening, weighed down by policy uncertainty, high interest rates, and tariff pressures.”

The inflation data within the report will also draw scrutiny. The gross domestic purchases price index rose 1.9%, a deceleration from the previous quarter. However, the core PCE index—closely watched by the Federal Reserve—accelerated to 2.5%, suggesting underlying price pressures remain persistent.

With the August 1 deadline for a new wave of tariffs looming, economic forecasting remains unusually complex. Most analysts expect GDP growth to moderate in the second half of the year as the temporary boost from trade flows fades and the weight of tighter monetary policy and ongoing trade tensions continues to bear down on business investment and hiring.

This article was updated to clarify the contribution of net exports to the GDP figure.