The U.S. economy grew at a 2.2% inflation-adjusted annualized pace in the second quarter, well above the 1.5% the government had estimated earlier. Households and businesses did the heavy lifting. They kept spending and investing even as the Federal Reserve raised interest rates.
Economists didn't expect the change. FactSet consensus estimates showed forecasters expected the earlier reading to hold.
The Numbers
The revised figure still trails the first quarter. The economy grew at a 2.5% annualized pace in the January-to-March period, making the latest number a slowdown from that mark. But the second-quarter estimate climbed sharply, and the revision points in the right direction.
Consumer spending, which accounts for two-thirds of gross domestic product, drove the change. It rose 0.9% in the second quarter, its fastest pace in some time. The Commerce Department had previously put consumer spending growth at just 0.1% for the quarter. That's a gap of eight-tenths of a percentage point in a category that dominates the national economy.
Business investment also surged. The report said AI-related spending contributed to the increase.
Spending Through Headwinds
The Federal Reserve raised interest rates, making borrowing more expensive for businesses and consumers. Higher rates can slow investment and spending. In this case, both categories grew anyway.
Atsi Sheth, Moody's Ratings chief credit officer, addressed that resilience in a statement on Wednesday. "Today's US GDP data shows that consumers and businesses kept spending and investing through the second quarter, despite higher inflation and interest rate uncertainty," she said.
Sheth's wording matters. She cited higher inflation and interest rate uncertainty as the conditions under which households and firms kept their wallets open. The figures describe an economy where private decisions carried the quarter. Families made purchases. Companies committed capital, including to AI-related projects.
The Forecasting Question
The size of the revision raises a separate issue. Official estimates of consumer spending moved from 0.1% to 0.9% between readings, while economists using the earlier numbers expected them to hold. Businesses, investors and policymakers make decisions based on these early estimates. When the picture changes this much, decisions based on the first version look different in hindsight.
The story was developing and subject to updates.
Why This Matters:
The revision shows how much private spending can shape the economic picture, even when borrowing costs rise. Consumers and businesses drove second-quarter strength, and they kept spending while the Federal Reserve raised interest rates. From a market-oriented view, private demand and investment, including AI-related spending, are doing work that policy alone doesn't. The wide gap between the earlier and revised consumer spending figures, 0.1% versus 0.9%, also reminds readers that policymakers often work with incomplete data. Officials deciding on rates or other measures rely on numbers that can shift sharply. That argues for caution about acting on any single early reading.