U.S. Q2 GDP Growth Holds at 1.5% as Corporate Profits Jump $401 Billion

U.S. economic growth held at a 1.5% annual rate in the second quarter, according to the government’s second estimate, while corporate profits posted a far larger gain than in the first three months of the year. The updated figures from the Bureau of Economic Analysis left the headline growth rate effectively unchanged from the advance estimate released in July, even though several of the underlying components were revised.

Profits from current production increased $400.9 billion in the April-to-June quarter after rising $74.4 billion in the first quarter. That was one of the biggest new pieces of information in the release because BEA does not publish a current-quarter profit estimate in the advance GDP report. The large increase suggested that the corporate sector’s income picture improved sharply even as headline output growth slowed from the first quarter’s 2.1% pace.

Real gross domestic product, the broadest measure of U.S. output, grew more slowly than in the opening quarter of the year. Consumer spending, exports and private investment contributed to the second-quarter increase, while lower government spending reduced growth. Imports also increased, which subtracts from GDP because they reflect spending on goods and services produced outside the United States.

Consumer Spending Was Revised Higher, but So Were Imports

The headline GDP rate did not change in a meaningful way, but the second estimate showed a different mix of activity underneath the surface. BEA said the updated figures primarily reflected an upward revision to consumer spending that was largely offset by an upward revision to imports. Because the revisions moved in opposite directions, the published growth rate for real GDP remained 1.5%.

The agency’s full release materials show the technical change more precisely. The second estimate represented a downward revision of less than 0.1 percentage point to real GDP growth, which was too small to alter the published one-decimal reading. The accompanying full BEA release said the upward revision to personal consumption expenditures was led by services, especially health care, including hospital and physician services, based on newly available Census Bureau data.

Goods spending moved the other way. BEA said the downward revision to goods consumption was led by recreational goods and vehicles, including information processing equipment, and by gasoline and other energy goods. Even so, the broader revision to consumer spending was positive because the increase in services outweighed the decline in goods.

Imports were revised higher mainly because of new June international trade data and an adjustment related to Puerto Rico. In GDP accounting, larger imports reduce measured domestic output because GDP is intended to capture production inside the United States rather than total spending by U.S. residents. That arithmetic explains how a stronger reading on consumption can coexist with an unchanged headline GDP number.

The comparison with the first quarter also helps frame the quarter’s moderation. Real GDP grew 2.1% in the first quarter, so the second quarter still represented slower aggregate expansion even after the spending revision. Government spending turned down, and both exports and private investment grew more slowly than they had earlier in the year. Consumer spending accelerated, but not enough to keep overall growth near the first-quarter pace once the effect of imports was taken into account.

Private Domestic Demand Looked Stronger Than the Headline Number

One of the most important details in the report was the revision to real final sales to private domestic purchasers, a measure that combines household spending and gross private fixed investment while leaving out inventories, trade and government spending. BEA said that measure increased 4.2% in the second quarter, revised up from 3.9% in the advance estimate.

Economists often watch this series as a gauge of underlying private domestic demand because it can provide a cleaner read on the spending decisions of households and businesses than the top-line GDP figure alone. A 4.2% annualized increase is much stronger than the 1.5% rise in overall GDP, which suggests that domestic private-sector demand was considerably firmer than the headline number initially implies.

Current-dollar GDP also rose a little faster than previously estimated. Nominal GDP increased 8.0% at an annual rate in the second quarter, up from 7.9% in the advance estimate. That gap between nominal and real growth reflected still-elevated price increases during the quarter.

The inflation measures embedded in the GDP report were revised higher as well. The price index for gross domestic purchases increased 5.8%, one-tenth of a percentage point above the earlier estimate. The personal consumption expenditures price index increased 5.3%, revised up from 5.1%, while the PCE price index excluding food and energy increased 3.6%, revised up from 3.4%. These quarterly changes are expressed at annual rates and should not be confused with the separate year-over-year inflation readings published in the monthly personal income and outlays data.

The economy’s companion income measure also showed somewhat stronger momentum than headline GDP. Real gross domestic income increased 2.2% at an annual rate in the second quarter, up from 1.2% in the first quarter. BEA also reported that the average of real GDP and real GDI increased 1.8% after rising 1.7% in the first quarter. Because GDP and GDI rely on different source data, the two estimates often diverge in the short run even though they are meant to describe the same underlying economy.

Corporate Profits Posted a Much Larger Increase

The corporate-profit figures were the sharpest acceleration in the release. BEA said profits from current production rose $400.9 billion in the second quarter, compared with a $74.4 billion increase in the first. The gain refers to the quarterly change in BEA’s profits measure, not the total level of profits earned during the quarter.

That distinction matters because BEA’s national-accounts concept is different from the earnings figures investors see in individual company reports. According to the agency’s GDP release additional information, profits from current production include inventory valuation and capital consumption adjustments so that the income measure aligns more closely with the national accounts framework used for GDP.

Put differently, the data are designed to measure corporate income in a way that is consistent with the production side of the economy. They are useful for understanding the broad direction of business profitability, but they are not a direct substitute for corporate earnings season metrics or for S&P 500 profit tallies compiled by market data firms.

The second-quarter numbers therefore painted a mixed but not weak macro picture. Headline real GDP remained modest at 1.5%, yet private domestic demand was revised higher, real GDI accelerated, and corporate profits showed a much larger increase than in the first quarter. That combination suggests a quarter in which some important parts of the economy ran stronger than the headline growth rate alone would indicate, even as imports and softer government spending weighed on the top-line number.

The next scheduled milestone is September 30, when BEA is due to publish its third estimate of second-quarter GDP and revised corporate profits. The agency has also said its 2026 annual update of the national, industry and regional economic accounts will begin that day, which means historical estimates may also be revised as more complete source data and updated methods are incorporated.