Yesterday, the Commerce Department’s final revision showed the U.S. economy expanded at an annualized 3.8% pace in Q2 — a material upgrade from earlier estimates and evidence of stronger-than-expected demand in the spring. The upward revision was driven largely by revised consumer spending figures, per the 3.8% rate.
The revision reflected that personal consumption expenditures were stronger than previously reported, which helps explain why consumer‑facing sectors have stayed buoyant even as labor data showed some softening. Retail sales and durable‑goods orders also surprised to the upside in recent releases.
At the same time, weekly initial jobless claims fell to 218,000, underscoring that layoffs remain historically low and that employers are reluctant to cut payrolls en masse. The combination of firm growth and still‑stable employment makes the Fed’s future moves more data‑dependent.
Why it matters: resilient GDP and low jobless claims narrow the margin for aggressive Fed easing — stronger growth lifts confidence and supports corporate profits, but it also raises the bar for convincing the Fed that inflation is sustainably on track to 2%. Watch whether momentum carries into Q3 and whether shelter and services inflation cool meaningfully.
