Catenaa, Thursday, July 31, 2025-The US economy expanded at a stronger-than-expected 3.0% annualized rate in the second quarter, driven largely by a sharp decline in imports, but underlying growth remained sluggish amid weakening domestic demand.
The Commerce Department reported Wednesday that consumer spending rose 1.4%, up from near stagnation in the first quarter. However, business investment slowed significantly, and residential investment contracted for a second consecutive quarter amid high mortgage rates.
The import drop, reversing a first-quarter surge caused by importers rushing to beat tariffs, contributed nearly 5 percentage points to GDP growth, offsetting inventory declines and masking signs of a slowing economy.
Economists warn that the headline GDP figure overstates economic health as the economy faces ongoing uncertainty linked to President Donald Trump’s protectionist trade policies, including sweeping tariffs that remain largely in place despite some trade deals.
Final sales to private domestic purchasers, which is a key measure of underlying demand, grew just 1.2%, the slowest pace since late 2022.
Federal government spending declined again, reflecting deep cuts outside defense and immigration enforcement.
The Federal Reserve kept interest rates steady at 4.25%-4.50%, acknowledging the slowdown and maintaining an uncertain outlook.
Experts expect slower growth through the remainder of 2025, with some predicting GDP growth to moderate to about 1.5% for the full year, down from 2.8% in 2024 and below the Fed’s estimated sustainable rate of 1.8%.
