Q2 GDP Shows Sizable Slowing Beyond Trade Fog
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GDP spiked in Q2, but looking through the tariff-related dislocations in consumer and business behavior, the underlying pace of growth slowed significantly.

Q2 GDP Shows Sizable Slowing Beyond Trade Fog

July 30, 2025

GDP spiked in Q2, but looking through the tariff-related dislocations in consumer and business behavior, the underlying pace of growth slowed significantly.

Trusted Insights for What’s Ahead®

  • The economy rising at 3.0% q/q SAAR in Q2, on the back of a 0.5% decline in Q1 reflected massive dislocations in the underlying components of growth. Such noise suggested the need to look at the underlying demand, which slowed significantly since last year. With the gauge for Q2 coming in very close to our expectations (2.8%), we estimate GDP growth will likely remain tepid going into H2 and reach a low point in Q4.
  • Consumer spending may continue to run weak, as rising prices weigh on real consumer demand, while investment may recover somewhat from a near-freeze in Q2, as uncertainty surrounding the fiscal outlook and tariffs diminishes.
  • GDP excluding volatile trade and inventory contributions, the gauge which is considered a better reflection of the underlying strength in the economy, increased at a sluggish rate of 1.1% q/q SAAR. Growth in the vicinity of 1.0% is usually consid
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Author

Yelena Shulyatyeva

Yelena Shulyatyeva

Senior US Economist

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