Q2 GDP growth was reported to be +3% today, a sharp contrast to the -0.5% contraction seen in the first quarter. However, both numbers are anomalies as the data is skewed by irregular behavior regarding imports and exports as tariff policies evolved. In Q1, inventories soared as importers looked to front run tariff costs – this drags down GDP. Conversely in Q2, exports rose sharply as companies moved to monetize these goods. Taken together, these quarterly reports equate to a blended growth rate of about 1.25%, far below the 2.8% growth experienced during calendar 2024. More concerning perhaps, final sales to private domestic purchasers, a gauge of underlying consumer demand, looks to be deteriorating rapidly with growth falling from roughly +3% to just +1.2%. When comparing key economic indicators to the second half of 2024, the trend is weakening.
July 30, 2025
Q2 GDP growth was reported to be +3% today, a sharp contrast to the -0.5% contraction seen in the first quarter. However, both numbers are anomalies as the data is skewed by irregular behavior regarding imports and exports as tariff policies evolved. In Q1, inventories soared as importers looked to front run tariff costs – this drags down GDP. Conversely in Q2, exports rose sharply as companies moved to monetize these goods. Taken together, these quarterly reports equate to a blended growth rate of about 1.25%, far below the 2.8% growth experienced during calendar 2024. More concerning perhaps, final sales to private domestic purchasers, a gauge of underlying consumer demand, looks to be deteriorating rapidly with growth falling from roughly +3% to just +1.2%. When comparing key economic indicators to the second half of 2024, the trend is weakening.