US GDP for Q2 increased by 3.0%, outperforming the 2.4% estimate. However, the growth mix may be less favourable, with a sharp decline in imports contributing to the rise. Real final sales were moderate at 1.2%, marking the lowest level since Q4 2022.<\/p>\n
Consumer spending saw a modest rise at 1.4%, up from the previous quarter’s 0.5%. Core PCE increased slightly to 2.5% from 2.3%. PCE prices were at 2.1%, lower than the 2.9% estimate. Excluding food, energy, and housing, the PCE rate was 2.2%, down from 3.5% the previous quarter. PCE services, excluding energy and housing, stood at 2.3%, compared to 4.3% last quarter.<\/p>\n
The Atlanta Fed’s GDP growth estimate increased to 2.9% from 2.4% recently. Trade added 0.5% to GDP, while inventory unwinding detracted from growth. Private domestic demand slowed to an annualised 1.2%, a decrease from 1.9% in Q1. Residential investment fell by around 10%, but was partially offset by investments in technology and intellectual property.<\/p>\n
Overall, the economic growth appears to be driven by temporary trade improvements rather than comprehensive domestic strength as the year progresses.<\/p>\n
The initial headline of 3.0% GDP growth for the second quarter is misleading for our strategy. We see that real final sales to private domestic purchasers, a key gauge of underlying strength, slowed to just 1.2%. This is the weakest reading we have seen since the fourth quarter of 2022, suggesting domestic demand is softening considerably.<\/p>\n
The inflation data within the report supports a more cautious outlook. While Core PCE was slightly hot at 2.5%, the trend in other key areas, like PCE services excluding energy and housing, fell sharply to 2.3% from 4.3% last quarter. This cooling inflation gives the Federal Reserve justification to lean more dovish in the months ahead.<\/p>\n
This weak domestic picture aligns with other recent data points we have been tracking. The June 2025 jobs report showed non-farm payrolls adding only 150,000 jobs, while the unemployment rate ticked up to 4.1%. Consumer confidence has also been trending down for the past three months, signaling that the consumer is losing steam.<\/p>\n
For the coming weeks, we believe volatility may increase as the market looks past the headline number. The CBOE Volatility Index (VIX) has been hovering near multi-year lows around 13, but this report’s underlying weakness could push it higher. We should consider strategies that benefit from a potential downturn or, at the very least, a cap on market upside.<\/p>\n
Looking back to late 2023, we saw a similar situation where slowing growth expectations caused a significant rally in bonds even as the Fed held rates steady. We should consider buying puts or put spreads on broad market indices like the SPY to hedge against a potential pullback. Additionally, call options on Treasury bond ETFs like TLT could perform well if the market begins to price in earlier-than-expected rate cuts.<\/p>\n
The main takeaway is that the growth was heavily supported by a temporary drop in imports, which is not a sustainable driver. As we head into August 2025, our focus must be on the weakening domestic core of the economy. We anticipate that subsequent data on employment and inflation will confirm this slowing momentum.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" US Q2 GDP rose 3.0%, led by trade gains; domestic demand and consumer spending showed modest growth.<\/p>\n","protected":false},"author":62,"featured_media":17022,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-27673","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/27673","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=27673"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/27673\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/17022"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=27673"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=27673"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=27673"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}