The US economy expanded in the second quarter at a slightly faster pace than initially estimated on a pickup in business investment and an outsize boost from trade.
Inflation-adjusted gross domestic product, which measures the value of goods and services produced in the US, increased at a 3.3% annualized pace, the second estimate from the Bureau of Economic Analysis showed Thursday. That is compared with an initially reported 3% increase.
Business investment expanded at a 5.7% pace after surging in the first quarter. The latest figure was stronger than the 1.9% initially reported and reflected an upward revision to investment in transportation equipment and the strongest advance in intellectual property products in four years.
US Economy Expanded at Faster Pace in Second Quarter
Upward revision reflected a bigger increase in business investment
Source: Bureau of Economic Analysis
The turnaround in GDP followed a first-quarter contraction that was the first since 2022 as companies raced to import goods ahead of tariff hikes. Looking forward, the economy is projected to expand at a modest pace as consumers and businesses adjust to President Donald Trump’s trade policy.
The “revisions do not change the story that underlying demand is slowing outside of a few specific parts of the economy,” Citigroup Inc. economists Veronica Clark and Andrew Hollenhorst wrote in a note. “We expect underlying growth will slow further as the labor market weakens and tariff costs increasingly weigh on activity.”
The dollar remained lower and two-year Treasury yields were still higher after the GDP data. Traders still largely expect the Federal Reserve to cut interest rates next month.
The government’s other main gauge of economic activity — gross domestic product — surged 4.8% after a 0.2% annualized advance in the first quarter. Whereas GDP measures spending on goods and services, GDI measures income generated and costs incurred from producing those same goods and services.
The GDI data include figures on corporate profits, which rose 1.7% in the second quarter after declining in the first three months of the year by the most since 2020. The extent to which American companies choose to raise prices in response to tariffs rather than absorbing the cost has become a key question for the US economic outlook in 2025.
A measure of after-tax profits for nonfinancial firms as a share of gross value added — a proxy for margins — held at 15.7%, well above levels that prevailed from the 1950s to the pandemic.
Net exports added nearly 5 percentage points to GDP, the most on record after weighing on GDP in the first three months of the year. Goods and services that aren’t produced in the US are deducted from the GDP calculation but counted when consumed.
The economy’s primary growth engine — consumer spending — advanced at a 1.6% annualized rate, compared with an initial estimate of 1.4%. In the first quarter, the pace of outlays was the slowest since the start of the pandemic.
Retailers from Walmart Inc. to Home Depot Inc. are expressing optimism about the resilience of US consumers, even as tariff-fueled price hikes are increasingly starting to show up on store shelves.
Because swings in trade and inventories have distorted overall GDP this year, economists are paying closer attention to final sales to private domestic purchasers, a narrower metric of consumer demand and business investment. This measure rose at a 1.9% pace for the second quarter.
The GDP report showed the Fed’s preferred inflation metric — the personal consumption expenditures price index, excluding food and energy — rose at a 2.5% rate in the second quarter, the same as initially estimated. July PCE data are due Friday and will also offer insights into real consumer spending and wage growth at the start of the third quarter.
The Fed has been watching to see whether Trump’s tariffs drive up inflation. Speaking last week at the Fed’s annual conference in Jackson Hole, Wyoming, Chair Jerome Powell said the effects of higher tariffs on prices are “now clearly visible,” but he carefully opened the door to an interest-rate cut in September, given the greater risk the job market could falter.
The Commerce Department also began distributing US GDP data on public blockchains on Thursday. The move, as described by Commerce Department officials, creates another avenue — not a replacement — for publishing data.
A separate report showed that recurring jobless claims, a proxy for the number of people receiving unemployment benefits, fell during the week ended Aug. 16. That week is when surveys for the government’s monthly jobs report were conducted. The August employment data are due next week.
Shoppers will begin paying more for overseas shipments on Friday when the U.S. eliminates an exception that kept tariffs from applying to small orders. The end of the so-called de minimis exemption means even parcels worth less than $800 will be subject to levies. Bloomberg provides a sneak peek at what that might mean in practice, with one consumer facing $934 in tariffs for computer parts ordered online. The change has upended international shipping, with several nations halting deliveries to the U.S.
Walgreens Boots Alliance has gone private. Private equity firm Sycamore Partners completed its takeover of the drugstore chain Thursday, about five months after the $10 billion deal was first announced. Walgreens' various businesses will be split into independent companies, including Boots Group and VillageMD. Mike Motz, formerly of Staples, will take the CEO reins from Tim Wentworth, while Wentworth will become a director of the new retail pharmacy unit. It's a rough time for retail pharmacies overall, as they face tougher competition from online vendors.
Dollar General’s Q2 earnings make one thing evident – the discounter is no longer just competitive on price. It’s quietly building a delivery and digital ecosystem that could give it an edge in the one place big-box retailers still struggle: rural America.
Dollar General turned in a stronger-than-expected second quarter, showing it can grow both sales and profitability in a retail backdrop where incumbents like Target are flailing. Revenue rose 5.1% to $10.7 billion, fueled by continuous same-store sales growth and new store openings, and earnings per share climbed 9.4% to $1.86. Operating profit increased 8.3% as tighter inventory control and lower shrink boosted margins, highlighting how the discounter’s multiple initiatives allow it to expand margins while pulling in more shoppers across income levels.
The company’s rapidly scaled delivery partnerships, with DoorDash and Uber Eats, along with its own same-day delivery offering, are a key element to the story of its expanded operating profit. These new partnerships allow Dollar General to bring convenience into towns that have traditionally been beyond the reach of one-hour delivery promises, CEO Todd Vasos told analysts on an Aug. 28 earnings call.
“We saw a 60% year-over-year increase on [DoorDash’s] platform… and we just signed a deal with Uber Eats. By the end of the third quarter, we’ll have 14,000 stores up and running on that platform,” Vasos said.
Even more striking, Dollar General said more than 75% of orders are delivered in one hour or less, even in rural America.
“That is the fastest that we’ve seen out there across the spectrum so far, especially in rural America, where it is hard to reach many, many customers. So we believe that’s a competitive advantage for us, and will continue to be as we move forward,” Vasos added.
The scale-up has been swift and thorough. Dollar General now offers same-day delivery through DoorDash in over 17,000 stores, has created and expanded its own generic DG Delivery to nearly 6,000 locations, and expects to reach 16,000 by year-end, well ahead of earlier expectations. Its Uber Eats partnership, still in its early stages, has already launched in 4,000 stores.
Rural delivery isn’t just a play for convenience; for Dollar General, it’s also drawing in wealthier customers.
“We’re seeing trade-in accelerating… not only our core customer but also mid- and high-income customers—all seeking value,” Vasos said.
Larger delivery baskets, often north of $20, point to incremental spending by those households, Kelly Dilts, Dollar General’s Chief Financial Officer, said during the call.
The trade-down effect that Dollar General is capitalizing on is visible across other categories. Consumables remain strong, but what’s striking is growth in discretionary spending, which is often the first casualty of inflation.
“Not only a strong 2.8% comparable sales number that we posted, but… sales were very balanced, as consumables and non-consumables contributed very nicely,” Vasos said.
In Q2, he added, Dollar General reported positive same-store sales across each of its three non-consumable categories, with increases of at least 2.5%, while its home products category logged its biggest quarterly same-store sales gain in more than four years.
The digital expansion is also reinforced by the DG Media Network, the company’s retail media arm, Vasos said. By leveraging unique data on rural shoppers, customers of national CPG brands often struggles to reach, Dollar General is creating a digital revenue stream to complement its store growth.
Taken together, these initiatives suggest Dollar General is carving out a defensible position in small-town America that Walmart or even Amazon