The Federal Reserve Bank of Atlanta has sharply raised its estimate for U.S. economic growth in the second quarter, citing newly released data pointing to stronger-than-expected business investment and an upward revision to consumer spending.
According to the latest update of the Atlanta Fed’s GDPNow model, released on June 2, real gross domestic product (GDP) is now projected to grow at a seasonally adjusted annual rate of 4.6 percent in the second quarter of 2025. That’s up from an estimate of 3.8 percent made just three days earlier and marks one of the most optimistic growth projections this year.
The revision follows the release of new data from the Census Bureau and the Institute for Supply Management (ISM), which modestly improved the model’s outlook for two major components of GDP: consumer spending and private-sector investment.
“After this morning’s releases from the U.S. Census Bureau and the Institute for Supply Management, the nowcasts of second-quarter real personal consumption expenditures growth and real gross private domestic investment growth increased from 3.3 percent and [minus] 1.4 percent, respectively, to 4.0 percent and 0.5 percent,” the Atlanta Fed stated in its update.
The ISM Manufacturing Purchasing Managers’ Index, released earlier on June 2, showed continued contraction in factory activity in May with a headline index of 48.5, below the neutral 50 mark. However, the pace of contraction in key subcomponents such as production and new orders slowed, suggesting a degree of improvement. The production index rose to 45.4 from 44.0, and new orders ticked up to 47.6 from 47.2. While modest, those gains were enough to help nudge the Atlanta Fed GDP model’s investment assumptions into positive territory.
Meanwhile, the Census Bureau’s construction spending report for April showed a 0.4 percent decline in total spending, driven by continued weakness in residential construction. However, the contraction was smaller than in March, and public construction projects showed signs of strength, with federal construction spending rising by 2.7 percent. These offsets likely reinforced the Atlanta Fed model’s upward revision to overall investment.
Seen in combination with the ISM data, the construction spending figures suggest a business investment climate that, while still under pressure from high interest rates and trade uncertainty, is performing better than previously assumed.
Since returning to the White House for a second term, President Donald Trump has pushed aggressively for new domestic and foreign investment in U.S. industry as part of his pledge to usher in a “Golden Age of America.” According to a tally published by the White House in mid-May, trillions of dollars in announced investments are pending in manufacturing, production, and infrastructure.
The Atlanta Fed’s second-quarter projections come on the heels of an upward revision to the government’s estimate of economic performance in the first quarter. According to the second estimate from the Bureau of Economic Analysis (BEA), released on May 29, the economy contracted by 0.2 percent in the first quarter of 2025—slightly less than the initial reading of negative 0.3 percent.
The improvement reflected stronger gross private domestic investment, including capital goods purchases, homebuilding, and changes in inventories. However, first-quarter consumer spending was revised downward to 1.2 percent from the previously estimated 1.8 percent, signaling softer-than-expected household demand early in the year.
The BEA will publish its initial estimate for second-quarter GDP on July 30, offering the first official readout on how the economy performed this spring.
