After the sharpest quarterly contraction in three years, the U.S. economy roared back robustly in the second quarter, with gross domestic product rebounding well above expectations—offering President Donald Trump a timely economic victory to celebrate.

The U.S. gross domestic product expanded at a 3% annualized pace in the second quarter, after a 0.5% contraction in the previous quarter, according to advance estimates released Thursday by the Bureau of Economic Analysis.

The outcome surpassed economists expectations of a 2.4% growth, and marked the strongest pace of growth since the third quarter of last year.

“3%, way better than expected!” Trump stated on Truth Social. He then seized the moment to ramp up pressure on Fed Chair Jerome Powell just hours before the Federal Open Market Committee (FOMC) meeting later in the day.

“Too Late must lower the rate. No Inflation! Let people buy, and refinance, their homes!”

What Drove The Rebound?

Trade-driven distortions that skewed first-quarter data—caused by a surge in pre-tariff imports—unwound in the second quarter.

The upsurge in GDP was powered primarily by a 30.3% collapse in imports—a reversal of the 37.9% surge seen in Q1 as businesses scrambled to stockpile goods before tariffs kicked in.

Since imports subtract from GDP, the drop provided a significant boost to the quarterly figures.

Consumer spending, the bedrock of the U.S. economy, also showed renewed strength. Real personal consumption expenditures rose 1.4%, up from just 0.5% in the previous quarter.

One of the biggest surprises was the inflation rate. The core Personal Consumption Expenditures index—the Fed's preferred inflation gauge—rose 2.5% quarter-over-quarter, down from 3.5% in the first quarter.

Headline PCE prices slowed sharply from 3.7% to 2.1%.

In a separate release, ADP's July employment report showed private payrolls rebounding strongly, rising by 104,000 after June's 23,000 contraction—easily topping expectations for a 74,000 gain.

Market Reactions: Dollar Extends Rally, Crude Eyes $70

The U.S. dollar index (DXY) climbed 0.4% Thursday, extending its rally to a fifth consecutive session after stronger-than-expected economic data lifted confidence in the U.S. outlook.

Gold prices dropped as the appetite for safe-haven assets cooled. The SPDR Gold Trust fell 0.4% to $3,315 per ounce.

Stock futures pointed to a modestly positive open. S&P 500 contracts were up 0.1% at 6,380, while Nasdaq 100 futures gained 0.2% to 23,358.

Oil extended its rally, with WTI crude rising above $69.50 a barrel—the highest since June 23—buoyed by tightening supply and resilient demand.

Markets will now turn their attention to the Federal Reserve's policy decision later Wednesday, where rates are widely expected to remain steady at 4.25%-4.5%. However, growing speculation points to possible dissent among committee members who favor rate cuts.

Later this week, investors will also digest the June PCE inflation report on Thursday and the July jobs report on Friday—two key data points that could shape the Fed's next steps.

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