US economy grows at fastest pace in nearly two years in second quarter

WASHINGTON, Sept 25 (Reuters): The US economy grew faster than previously estimated in the second quarter amid strong consumer spending and business investment, though momentum appears to have ebbed against the backdrop of lingering uncertainty from trade policy.

The quickest growth pace in nearly two years reported by the Commerce Department on Thursday also reflected a sharp contraction in the trade deficit as the flood of imports slowed.

The economy's resilience was underscored by other data showing strong demand by business for equipment in August and a drop in first-time applications for unemployment benefits last week as companies hoard workers.

The data at face value suggested further interest rate cuts from the Federal Reserve were probably unwarranted. Tepid hiring blamed by economists on President Donald Trump's tariffs on imports and an immigration crackdown caused job growth to almost stall in the three months through August, prompting the U.S. central bank to resume cutting rates last week.

"It is clear that the current level of Fed interest rates is not slowing the economy down and is not hurting the labor market either," said Christopher Rupkey, chief economist at FWDBONDS. "If job growth is slowing down, it is not the economy that is the problem, it is the Trump 2.0 policies on immigration. The economy is steady as a rock."

Gross domestic product increased at an upwardly revised 3.8% annualized rate last quarter, the fastest pace since the third quarter of 2023, the Commerce Department's Bureau of Economic Analysis (BEA) said in its third GDP estimate.