Q2 GDP revised up to 2.2%, but August's goods deficit hit $132.6 billion, the widest of 2026

The economy grew at a 2.2% annual rate in the second quarter, the Bureau of Economic Analysis said Wednesday in its third estimate. That is 0.7 percentage point above the previous estimate and above the 1.5% economists polled by LSEG expected, Fox Business reported. The BEA put first-quarter growth at 2.5%, up 0.4 point, after its annual update rewrote the accounts back to 2021.

Demand at home was stronger than the headline. Real final sales to private domestic purchasers, which is consumer spending plus business and housing investment, rose at a 4.6% rate. Gross domestic income grew 2.6%. Corporate profits from current production rose $384.0 billion in the quarter, $16.9 billion less than the BEA had estimated before.

The third quarter has a trade problem

That quarter ended three months ago. A Census Bureau report out at the same hour covers August, and it shows the goods trade deficit widening to $132.6 billion from $118.9 billion in July. Imports rose $17.4 billion to $336.1 billion. Exports rose only $3.7 billion to $203.4 billion. In June the gap was $101.1 billion, and a year earlier it was $85.2 billion. Bloomberg called it the largest gap since 2025.

The usual read is that a wider deficit subtracts from GDP. That is only partly right here. Capital goods are machinery and equipment such as computers and servers. They make up $53.1 billion of the $73.2 billion rise in imports over the past year, which is 72%. Imports are subtracted in the GDP formula, but a machine a company buys and installs is added back as investment. So the drag from the August number is smaller than the $13.7 billion jump suggests. Imports that go into inventory are also added back: wholesale inventories rose 0.7% in August to $965.7 billion, and retail inventories rose 0.3%.

Consumer goods imports are up only 2.5% on the year. For a retailer or distributor, that is the line that matters. The import surge is not flowing into store shelves. It is going into equipment.

Where the quarter happened

Real GDP grew in 44 states and the District of Columbia. The range ran from 4.0% in New York, where finance and insurance led, to -2.3% in West Virginia, where mining pulled output down, the BEA said. Personal income ranged from 6.4% growth in Wisconsin to -4.2% in North Dakota, and earnings from 7.3% in Minnesota to -9.3% in North Dakota.

That spread lands on very different business bases. CheckThisBiz lists 465,701 independent businesses in New York, 153,784 in Wisconsin, 34,105 in West Virginia and 21,412 in North Dakota. In North Dakota, a 9.3% annualized drop in earnings shows up quickly at the diner, the parts counter and the contractor. Those businesses sell to the people whose paychecks shrank.

The full trade report, with services, comes from the BEA on its regular schedule. The September advance goods report is due October 28.

Sources: U.S. Bureau of Economic Analysis; U.S. Census Bureau, Advance Economic Indicators Report; Fox Business; state business counts from CheckThisBiz. Shares and differences are our calculations. This is market information, not investment advice.