The U.S. Economy Is On Firmer Footing Than Expected

The economic data released in September painted a picture of an economy on firmer footing than many expected amid the noisy headlines of 2025. The third estimate of second quarter GDP was revised higher to 3.8% quarter-over-quarter (annualized), the highest reading since the fourth quarter of 2021.
Although trade-related metrics from the first quarter clearly impacted that headline figure, there were also upward revisions to consumer spending and business investment. If excluding the impact of trade (including inventories), final sales to domestic purchasers were revised up to 2.4% from an initial estimate of just 1.1%. This metric is sometimes referred to as “core GDP,” and while still below the 3.35% average for 2023-2024, it shows no signs of imminent recession.
August personal income and spending data also revealed no signs of a softening consumer balance sheet. Real disposable income (ex-taxes/inflation) rose 0.1% in August and is on pace for a 1.9% increase in 2025 compared to 2.1% in 2024. Spending also outpaced expectations on both a nominal and inflation-adjusted basis.
Real consumer spending was negative for the first two months of the year amid heightened uncertainty before bouncing back. After adjusting for inflation, spending has averaged 0.37% growth in the past three months, or 1.47% annualized. The personal savings rate (income – spending) rose from 4.3% to 5.7% in the first four months of 2025 and has since fallen to 4.6% through August.
Sentiment surveys have been relatively weak in 2025, with many respondents pointing to tariffs as a primary worry, but it hasn’t yet been enough for consumers to slam the brakes on spending.

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Jason Haley joined ALM First in 2008 and is the firm’s chief investment officer. He heads ALM First’s Investment Management Group (IMG), which is responsible for leading the investment process and investment theme development. Haley also oversees all capital markets activities, including portfolio management, trading, market research and commentary, and execution of hedging and funding strategies for the firm’s depository clients. He holds an MBA with a concentration in finance and a BBA with a concentration in marketing, both from The University of Mississippi.

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