US economic growth was hotter than expected last quarter

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- Real GDP increased at an annualized rate of 3% in the second quarter, more than expected.
- That reverses the shrinking economy in the first quarter, but tariffs cloud future performance.
- The report is just one of several this week that highlight how the economy is doing.
US real gross domestic product grew at an annualized rate of 3% in the second quarter, surpassing the forecast of 2.5% and a sharp rebound from the first quarter's decline.
"Compared to the first quarter, the upturn in real GDP in the second quarter primarily reflected a downturn in imports and an acceleration in consumer spending that were partly offset by a downturn in investment," the Bureau of Economic Analysis said.
Real personal consumer spending rose 1.4% in the second quarter, surpassing the 0.5% increase in the first. Fixed investment rose just 0.4% in the second quarter after a 7.6% increase in the first quarter.
After a 37.9% increase in the first quarter, imports fell 30.3% in the second quarter as President Donald Trump's tariff push heated up. Imports are subtracted in the GDP calculation. Exports fell 1.8% in the second quarter, after a 0.4% rise in the first.
"The consumer has been resilient despite recent volatility and policy uncertainty, and any employment weakness will be viewed as a bellwether for weakening consumption, which would likely push the Fed to resume cutting rates sooner," said Ryan Weldon, investment director and portfolio manager at IFM Investors.
Other releases beyond Wednesday's Bureau of Economic Analysis report indicate how the economy is doing. The Federal Reserve's Beige Book covering economic conditions between late May and early July said five of the 12 Fed districts had slight or modest economic gains and another five reported flat activity, compared to three with slight economic growth and three with no change in activity in the previous report.
The Beige Book also said there was a slight improvement in employment. Analysts and economists told Business Insider that the labor market is good if you have a job, and is not so great if you're a job seeker.
Trump's widespread tariffs are supposed to start on August 1 after a few pauses. The US and EU announced a trade deal on Sunday, including a 15% tariff rate on goods imported from the EU with some exceptions, Europe purchasing billions of dollars in US energy, and eliminating tariffs on US industrial goods.
On Wednesday afternoon, the Federal Reserve will announce its newest decision on interest rates, which economists and analysts expect to be held steady for the fifth straight decision. More data will be out this week, including the jobs report from the Bureau of Labor Statistics and monthly consumer spending from the Bureau of Economic Analysis.