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\u2013June period, topping both the government\u2019s previous 3.3% estimate and the initial 3% reading. It was the strongest showing since the fall of 2023, underscoring the economy\u2019s resilience despite high borrowing costs and persistent inflation.<\/p>\n
It comes amid a flurry of revisions of major economic data, including a definitive finding that nearly 1 million fewer jobs were created<\/a> between March 2024 and March 2025, which one analyst saw as proof that AI is \u201cautomating away\u201d 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.<\/p>\n Consumer strength<\/p>\n Economists point to Americans\u2019 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.<\/p>\n \u201cWith jobless claims and retail sales both coming in stronger than expected, it\u2019s no surprise that GDP has also exceeded forecasts,\u201d 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. \u201cThe old saying \u2018Don\u2019t fight the Fed\u2019 should be revised to \u2018Don\u2019t fight the U.S. consumer.\u2019 Thanks to them and the wealth effect from rising stock prices, this economy is doing just fine!\u201d<\/p>\n Not everyone was as calm about the latest revision.<\/p>\n Market risks<\/p>\n 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 \u2014 but markets may already be pricing in too much optimism.<\/p>\n \u201cIt only seems fitting that the most distrusted bull market of all time is accompanied by the most distrusted economy of our lifetime,\u201d Zaccarelli said in a statement to Fortune. Noting the strong growth in GDP despite \u201cthe elevated inflation we have been living with since Covid,\u201d he argued that economic growth is exceeding that inflation \u201cby a very large margin.\u201d<\/p>\n Zaccarelli added that while stronger growth bolsters corporate earnings and stock prices, his \u201clargest concern\u201d has to do with valuations. \u201cWe agree that the economy is strong and growing \u2026 but a lot of that good news is already priced in \u2014 and then some,\u201d he warned. \u201cIf 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.\u201d He added that there is \u201clittle room for error.\u201d<\/p>\n The previous day, Bank of America<\/a> Research\u2019s head U.S. equity analyst Savita Subramanian had separately acknowledged that there\u2019s a \u201cvaluation problem<\/a>\u201d in markets. Her team\u2019s research that the S&P 500 was \u201cstatistically expensive\u201d in 19 out of 20 metrics, with four hitting record highs.<\/p>\n As the Federal Reserve monitors inflation and contemplates eventual rate cuts, the second-quarter revision highlights an economy that continues to defy forecasts \u2014 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\u2018s Jim Edwards reported<\/a>: \u201cEquity prices are fairly highly valued<\/a>.\u201d<\/p>\n For this story,\u00a0Fortune\u00a0used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing.\u00a0<\/p>\n