Investment, Consumer Spending Lift US GDP to 2.2 Percent

U.S. economic growth came in stronger than initially reported in the second quarter, upgraded by firmer consumer spending and a pickup in business investment, the Bureau of Economic Analysis said on Sept. 30.

Gross domestic product—also known as GDP—grew at an annualized rate of 2.2 percent, up from the previous estimate of 1.5 percent.

Despite the higher revision, the economy still decelerated from the 2.5 percent expansion registered in the first three months of 2026.

The upgrade reflected robust consumer spending in the April–June span, which climbed by 3.8 percent, up from 0.7 percent in the first quarter.

Consumers had participated in several major seasonal activities during the quarter, including Amazon Prime Day and the FIFA World Cup.

Consumption, which accounts for two-thirds of economic activity, remained solid in the third quarter.

August personal spending surged at a higher-than-expected pace of 0.9 percent, from a downwardly revised 0.1 percent in July, the bureau reported.

Personal income was more subdued last month, ticking up 0.2 percent and coming in slightly below economists’ expectations.

Meanwhile, business investment surged by 9 percent, highlighting the ongoing artificial intelligence (AI) boom unfolding across the United States.

Investment in housing, which has been anemic amid higher interest rates, rose almost 3 percent for the first time since late 2024.

Additionally, excluding government outlays and trade numbers, gross private domestic investment was close to a healthy 5 percent.

On the trade front, exports rose 5 percent, and imports climbed nearly 13 percent.

Imports have been accelerating in recent months, also reflecting the AI infrastructure buildout and companies purchasing foreign capital goods and industrial supplies.

The U.S. trade deficit had widened sharply, rising by 11.5 percent to $132.6 billion, according to Census Bureau data released on Sept. 30.

Goods imports swelled almost 6 percent, fueled by capital goods, industrial supplies, and food.

Government expenditures dipped by 0.1 percent in the second quarter, driven by a more than 2 percent decrease at the federal level.

Inflation Watch

Inflation continued to be high in the past quarter. The GDP Price Index—a gauge of price changes for goods and services produced in the United States—advanced to 6.1 percent, firmly above the 3.6 percent posted earlier this year.

Separately, the bureau released the Federal Reserve’s go-to Personal Consumption Expenditures (PCE) price index.

August’s annual PCE inflation rate was flat at a lower-than-expected 3.4 percent. Stripping out volatile energy and food prices, the 12-month core PCE inflation rate also held steady at 3 percent, below expectations.

With a strong private-sector jobs report—companies added a higher-than-expected 90,000 jobs in September—the data provide a “goldilocks combination,” says Chris Osmond, CIO of Fifth Third Wealth Advisors.

“Q2 growth was stronger than expected, consumer spending was more robust, the labor market rebounded sharply in September, and the Fed’s preferred inflation gauge came in well below expectations,” Osmond said in a note emailed to The Epoch Times.

“The net effect is broadly supportive of risk assets and materially reduces the probability of an October rate hike, while keeping a Q4 hike on the table.”

The Fed was widely expected to hike the benchmark federal funds rate—a key policy rate that influences borrowing costs for businesses, consumers, and governments—but dovish comments from a key central bank figure on Sept. 29 pushed expectations back to December.

Blockbuster Growth Expected in Q3

The U.S. economy is expected to post blockbuster growth in the third quarter.

According to the Atlanta Federal Reserve’s GDPNow Model estimate, third-quarter growth is forecast to be 5 percent, driven by consumer spending, changes in private inventories, and capital investment.

Even further out, the New York Fed Staff Nowcast projects fourth-quarter growth at 2.6 percent.

While GDP growth has been decent this year, economic prospects appear to be strengthening, fueled by consumer resilience and the data center boom.