Stocks hit all-time highs after data revealed the US economy grew faster than expected during the latest quarter, boosted by strong consumer spending and big investments in artificial intelligence that eased concerns about the effects of Trump’s tariffs.
US gross domestic product – which measures spending on goods and services – expanded at a 3.3% annual pace from April through June. That was above an initial 3% estimate and a sharp rebound from the 0.5% drop in the first quarter, the Commerce Department said Thursday.
Net exports added nearly 5 percentage points to the GDP – the most on record after trade tensions had weighed on the figure earlier this year.
“With GDP running at 3.3%, the economy appears to be on all cylinders, and it should be a boost of confidence to markets that most of the tariff-angst was misplaced earlier this year,” Chris Zaccarelli, chief investment officer for Northlight Asset Management, said in a note.
The S&P 500 rose 0.3% to 6,501.86 — a fresh record for the benchmark index.
Upward revisions to consumer spending and investment drove the upside, according to the Bureau of Economic Analysis — and investments in AI, including for the construction of big, power-hungry data centers to fuel the boom — were a major factor, according to analysts.
Thursday’s reading shows “increasingly concrete signs of an AI-related boom in tech investment,” Capital Economics chief North America economist Paul Ashworth said in a note.
The GDP’s turnaround follows a sharp first-quarter contraction that was the first since 2022 as companies raced to import and stockpile goods ahead of President Trump’s tariff deadlines.
Now the economy is expected to adjust to tariffs, especially as final rates roll in, and grow at a modest pace, according to analysts.
“Cost increases on imports benefit domestic production. Over time, the combination of tariffs and trade deals will further increase GDP,” Kenin Spivak, chief executive of SMI Group, told The Post.
Jeffrey Roach, chief economist for LPL Financial, said these upward revisions have raised the bar for the third quarter.
“Economic growth will likely flatline in the third quarter. Softer growth in Q3 will add fuel to those calling for rate cuts,” Roach said in a note.
During his Jackson Hole speech last week, Fed Chair Jerome Powell hinted at a possible interest rate cut in September to support economic growth.
Gross domestic income — or GDI, which measures income generated and costs incurred from producing goods and services — surged 4.8% in the second quarter. It had recorded a slow 0.2% pace in the first three months of this year.
GDI also includes data on corporate profits, which rose 1.7% in the second quarter after dropping earlier this year by the most since 2020.
Earlier this month, data showed wholesale inflation hit a much hotter 3.3% rate in July, while consumer inflation remained fairly tame at 2.7%, a sign that businesses are eating the bulk of the tariffs for now.
Thursday’s GDP revision adds about $20 billion to the adjusted annualized economic output in the second quarter.
When combined, first- and second-quarter GDP readings show the US economy grew at an average of 1.4% in the first half of 2025. That’s still far below the 2.5% pace seen in the same period last year.
Economists are now looking ahead to the personal consumption expenditures index, the Fed’s main inflation gauge, which is due Friday morning.
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