US Economy Sees Boost from Revised GDP Growth and Consumption Boom

The US economy has experienced a significant revision in its growth trajectory, with the Q2 GDP growth revised up by 0.7 percentage points. This revision is largely due to an upward adjustment in the deflator for personal income, which has led to an increase in this measure of income above January 2025 levels.

As a result, the gap between output/income measures and employment indicators has been thrown into sharper relief. The latest statistics show that civilian employment adjusted for population controls, manufacturing production, ADP private nonfarm payroll employment, real retail sales, CPI deflated freight services indexes, and coincident index all point to strong output growth.

Notably, consumption is driving this growth, with real retail sales growing at an annualized 6.6% in August. This boom in consumption reinforces the view that survey-based assessments of consumers' mood are not necessarily informative regarding actual consumption.