U.S. economy upgrades Q2 growth to 3.8% on stronger consumer spending, lower imports

The U.S. economy expanded at a 3.8% annual rate in the second quarter, the Commerce Department said Thursday, upgrading the government's prior estimate of 3.3%. The revision follows a spring rebound from a 0.6% first-quarter contraction caused in part by a surge in imports before tariff policy changes took hold. Imports fell at a 29.3% pace in April through June, boosting growth by more than five percentage points.

Consumer spending increased 2.5% in the second quarter, up from 0.6% in the first quarter and above the 1.6% the government previously estimated. The latest numbers come as tariff policy changes continue to generate uncertainty for businesses, with economists warning tariffs can raise costs and reduce efficiency even as inflation has remained relatively modest so far.

Labor market revisions released earlier this month showed the economy created 911,000 fewer jobs than originally reported in the year that ended in March, underscoring a softer payroll pace in recent months. Since March, job creation has slowed to about 53,000 a month. Analysts surveyed by FactSet expect September payrolls to rise by roughly 43,000, with the unemployment rate holding near 4.3%.

To bolster the job market, the Federal Reserve cut its benchmark interest rate last week for the first time since December. Forecasters surveyed by FactSet expect the economy to slow to about 1.5% growth at an annual rate in the third quarter. The Commerce Department will publish its third and final read on second-quarter growth and issue the initial estimate of July-September GDP on Oct. 30.