U.S. Q2 GDP Revised Higher to 3.3%; Core PCE Holds at 2.5% — Evening Brief – 08.28.25
The Commerce Department’s revised data showed that U.S. GDP expanded at a 3.3% annualized pace in the second quarter, an upward adjustment from the initially reported 3.0% and above the consensus of 3.1% and the highest quarterly print since the third quarter of 2023. This follows a weak first quarter, when the economy contracted by 0.5% due to a sharp surge in imports that weighed on growth.
The stronger second-quarter figure was fueled by firmer household consumption and a notable pickup in business investment—especially in data centers and technology-related infrastructure—while government spending was marked down and imports were revised higher. Consumer spending grew at a 1.6% clip, an improvement from the initial 1.4% estimate and a significant acceleration from the 0.5% pace in the first quarter, underscoring the resilience of U.S. households despite elevated borrowing costs.
On the inflation front, the revisions point to further progress. Headline PCE inflation slowed to 2.0%, a touch below the prior 2.1% estimate and down sharply from 3.7% in the first quarter. Core PCE, the Fed’s preferred gauge, remained at 2.5%, moderating from 3.5% in the previous quarter. Together, the data suggests growth is firming while inflation pressures are gradually easing—exactly the balance policymakers have been hoping to strike.
More significant than the headline GDP figure was the sharp upward revision in real final sales to private domestic purchasers—a key measure that combines consumer spending with business investment. This metric climbed 1.9% in Q2, a full 0.7 percentage point higher than the prior estimate, driven primarily by a substantial upgrade in fixed investment, underscoring the strength of underlying private-sector demand.
Overall, the second-quarter revisions bolster the view that the U.S. economy remains on firm footing. The mix of resilient consumption, accelerating investment, and cooling inflation positions markets for a continuation of the soft-landing trade, with implications that extend across rates, equities, and private markets.