Analysts say strong U.S. GDP in 2025 hid weaker demand outside AI

In short: U.S. GDP looked strong in mid-2025, but economists warned that trade effects and AI spending made the economy look healthier than it was.

What's going on

Headline U.S. growth numbers in 2025 looked solid, but some economists said the details told a weaker story. In the second quarter of 2025, real GDP rose at a 3.0% annualized rate in the first estimate, and was later revised higher, reaching 3.8%.

That rebound came right after a small drop in the first quarter of 2025, when GDP contracted about 0.5% to 0.6%. A major reason was a surge in imports, as companies bought goods early ahead of expected tariffs (new taxes on imported products). When imports later fell back in Q2, GDP mechanically looked stronger, even though that change can be more like a timing shift than a true boost in everyday economic activity.

Economists also pointed to a narrow set of drivers supporting growth. EY-Parthenon chief economist Gregory Daco called the Q2 strength “largely a mirage,” arguing it mainly reflected the import swing after tariff-related front-loading. He and others said private-sector demand looked weak outside of a surge in AI-related investment, meaning spending tied to AI tools and data centers helped prop up the numbers while other areas lagged.

A similar pattern showed up in the third quarter of 2025, when GDP grew at a 4.3% annualized rate, the fastest pace in about two years. Reports said consumer spending helped, but private investment was still under pressure, partly because businesses were working down inventories built up earlier.

What to watch

A key question is whether growth broadens beyond AI-linked spending and trade-driven swings. If not, future GDP reports could keep looking strong on the surface while more households and businesses feel a slower economy, like a store that has one busy aisle and many quiet ones.

Source: NYTimes