The U.S. economy expanded at a much faster pace than initially estimated last quarter, according to new Commerce Department data released Thursday. Gross domestic product grew at a 3.8% annual rate in the April–June period, topping both the government’s previous 3.3% estimate and the initial 3% reading. It was the strongest showing since the fall of 2023, underscoring the economy’s resilience despite high borrowing costs and persistent inflation.
It comes amid a flurry of revisions of major economic data, including a definitive finding that nearly 1 million fewer jobs were created between March 2024 and March 2025, which one analyst saw as proof that AI is “automating away” entry-level jobs. The revised GDP figure reflects stronger consumer demand and business investment than earlier measured, signaling that households and companies alike continue to drive growth even under tightening monetary conditions.
Consumer strength
Economists point to Americans’ continued spending power as a central force behind the unexpected strength. Gina Bolvin, President of Bolvin Wealth Management Group in Boston, highlighted the key role of households.
“With jobless claims and retail sales both coming in stronger than expected, it’s no surprise that GDP has also exceeded forecasts,” Bolvin said in a statement to Fortune. Her comments reflect broad confidence that consumer activity, buoyed by a hot labor market and stock market gains, is keeping the expansion intact. “The old saying ‘Don’t fight the Fed’ should be revised to ‘Don’t fight the U.S. consumer.’ Thanks to them and the wealth effect from rising stock prices, this economy is doing just fine!”
Not everyone was as calm about the latest revision.
Market risks
While momentum is strong, some strategists caution against complacency. Chris Zaccarelli, Chief Investment Officer for Northlight Asset Management in Charlotte, N.C., noted that growth is outpacing expectations — but markets may already be pricing in too much optimism.
“It only seems fitting that the most distrusted bull market of all time is accompanied by the most distrusted economy of our lifetime,” Zaccarelli said in a statement to Fortune. Noting the strong growth in GDP despite “the elevated inflation we have been living with since Covid,” he argued that economic growth is exceeding that inflation “by a very large margin.”
Zaccarelli added that while stronger growth bolsters corporate earnings and stock prices, his “largest concern” has to do with valuations. “We agree that the economy is strong and growing … but a lot of that good news is already priced in — and then some,” he warned. “If we see some volatility in the near term (which we believe is a strong possibility) it will be because we are starting with much higher-than-average valuations.” He added that there is “little room for error.”
The previous day, Bank of America Research’s head U.S. equity analyst Savita Subramanian had separately acknowledged that there’s a “valuation problem” in markets. Her team’s research that the S&P 500 was “statistically expensive” in 19 out of 20 metrics, with four hitting record highs.
As the Federal Reserve monitors inflation and contemplates eventual rate cuts, the second-quarter revision highlights an economy that continues to defy forecasts — powered by consumers, tempered by investment risks, and shadowed by the possibility of market volatility ahead. Fed chair Jerome Powell himself seemed to rattle markets this week with an off-the-cuff remark about markets, as Fortune‘s Jim Edwards reported: “Equity prices are fairly highly valued.”
For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing.
