Another ‘That Darn Trump’ Episode: Economy Looked Pretty Good This Morning

The revised second-quarter GDP number came out this morning and was a bit of a surprise.

After tariff feuds, make-up sessions, and feuds yet again, plus the ongoing battle with the Federal Reserve, the whole financial world was holding its breath for the initial reading of 3.0 to be maintained or toppled. 

The second estimate of the U.S. gross domestic product report will be released Thursday, offering a fresh look at the country’s economic growth as President Donald Trump’s feud with the Federal Reserve intensifies.

Global markets are watching closely. The U.S. economy and those of countries around the world, such as India, are being tested this week by Trump’s aggressive tariff agenda.

The report will indicate whether the initial second-quarter estimate, which suggested growth despite Trump’s tariffs, holds up. The GDP shrank 0.5% in the first quarter but bounced back in the spring, growing a stronger-than-expected 3% from April through June.

What a delightful swing to the upside when the number came in.

🚨The economy grew at a rate of 3.3% in the second quarter, BEATING EXPECTATIONS AGAIN! pic.twitter.com/64xKvXuHv5

— RNC Research (@RNCResearch) August 28, 2025

There were some interesting and pretty strong metrics inside the positive move to the number, too. There is still, for all the tariff doom and gloom, no sign yet that they are crashing the economy or crushing the American consumer.

The U.S. economy grew at an even faster than thought pace in the second quarter as consumers and businesses held up against tariff volatility.

…Consumer spending helped push the number higher, rising by 1.6% compared to an initial 1.4% estimate.

Importantly, a measure called final sales to private domestic purchasers jumped 1.9%, up from the previous figure of 1.2%. Federal Reserve officials watch that metric closely as an indication of demand and sales that focuses on activity within U.S. borders, an especially important measure considering the uncertain impact of President Donald Trump’s tariffs.

The GDP number also reflected the unusual impact of the tariffs as they related to trade numbers.

Imports, which subtract from GDP, tumbled 29.8% in the quarter after companies stockpiled ahead of Trump’s April 2 “liberation day” announcement. The figure was a bit less than the previous estimate of 30.3%.

At the same time, exports, which add to GDP, fell by 1.3%, compared to the previous estimate of -1.8%. Taking the figures together, net exports added nearly 5 percentage points to the Q2 total.

Kind of a neat factoid about that bright export number – it was so strong points-wise, it was ‘the most’ on record exports have ever added to the GDP.

…The government’s other main gauge of economic activity — gross domestic income [GDI] — surged 4.8% after a 0.2% annualized advance in the first quarter. Whereas GDP measures spending on goods and services, GDI measures income generated and costs incurred from producing those same goods and services.

…The GDI data include figures on corporate profits, which rose 1.7% in the second quarter after declining in the first three months of the year by the most since 2020. The extent to which American companies choose to raise prices in response to tariffs rather than absorbing the cost has become a key question for the US economic outlook in 2025.

A measure of after-tax profits for nonfinancial firms as a share of gross value added — a proxy for margins — held at 15.7%, well above levels that prevailed from the 1950s to the pandemic.

Net exports added nearly 5 percentage points to GDP, the most on record after weighing on GDP in the first three months of the year. Goods and services that aren’t produced in the US are deducted from the GDP calculation but counted when consumed.

The personal consumption expenditures (PCE) prices, another favorite Fed metric that excludes food and energy, rose as expected, 2.5%, while the PCE price index itself lowered to 2.0%, which is, again, in line with the Fed’s inflation targets.

The Atlanta Fed’s GDP estimate is that the economy is growing at a 2.2% annualized pace as of now, based on all this data.

Weekly jobless claims came in below the estimate.

🚨 BREAKING: The experts are having a HORRIBLE morning. CNBC’s Rick Santelli reveals that the American labor market is “NOT sending ANY smoke signals” despite persistent panic after the latest jobless claims.

“It’s hard for me to get worried about this!”

Pair that with the GDP… pic.twitter.com/hgjoqumd7K

— Eric Daugherty (@EricLDaugh) August 28, 2025

Analysts, including those at Navy Federal, are saying it’s not showing any signs of ‘cracking’ yet.

It’s hard to get a job this summer, but layoffs aren’t picking up. That’s the encouraging news.

Initial jobless claims ticked up earlier this month, but they have come back down. And continuing claims have leveled off again.

The job market is still *frozen* but it’s not… pic.twitter.com/Pujok586Ij

— Heather Long (@byHeatherLong) August 28, 2025

…Initial jobless claims ticked up earlier this month, but they have come back down. And continuing claims have leveled off again.  

The job market is still *frozen* but it’s not showing more signs of cracking right now.  #jobs

‘Cracking’ is when a higher number indicates claims are beginning to rise, aka ‘cracks’ appearing in the job market, which eases pressure on rates. When claims are dropping, signaling a stronger job market, that’s hawkish for the Fed, and Jerome stays tight as a clam.

These were pretty neutral reads, right on target. As Santelli and the Navy Fed analyst both said, concurring with CNBC’s MarketWatch headline…

Jobless-claims retreat is a sign that recent increase was not the start of a trend

…layoffs seem to be in check, so who knows how this affects what the Fed will do? 

Additionally, there’s good news for a holiday trip. If you’re going anywhere for the Labor Day weekend, it should be a tad easier on your wallet than in years prior, unless you’re trapped in Newsom territory. Sorry.

Thanks to President Trump’s America First energy policies, families are hitting the road this Labor Day with the lowest gas prices since his first term.https://t.co/PXknDV8Jyu

— Treasury Secretary Scott Bessent (@SecScottBessent) August 28, 2025

If only you could get a handle on the ‘Are we THERE, yets?’ it might be damn near perfect.

Whatever your plans, there’s nothing wrong with basking in the moment a little.

We were assured that recession was imminent…

.@bloomberg: “The US economy expanded in the second quarter at a slightly faster pace than initially estimated on a pickup in business investment and an outsize boost from trade. Inflation-adjusted gross domestic product, which…

— Scott Jennings (@ScottJenningsKY) August 28, 2025

…Inflation-adjusted gross domestic product, which measures the value of goods and services produced in the US, increased at a 3.3% annualized pace…That compared with an initially reported 3% increase.”

Especially when things are going right.

Knowing there’s still so much that can go wrong when there’s so much left to do, you take the wins as you get them and enjoy the heck out of it.

Maybe these guys do know what they’re doing, hmm?

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