US First-Half Growth Comes in Slower Than 2024

US economic growth decelerated in the first half of the year, averaging 1.25%, a full percentage point below the pace for 2024, despite a 3% annualized increase in second-quarter GDP. This slowdown was primarily driven by reduced consumer spending and companies adjusting to unpredictable trade policy shifts, signaling potential broader economic headwinds.

Analysis

US economic growth demonstrated a significant deceleration through the first half of the year, a trend masked by a superficially strong second quarter. While inflation-adjusted GDP increased at a 3% annualized rate in Q2, the average growth for the first half was a much weaker 1.25%, representing a full percentage point decline from the pace set in 2024. This slowdown is attributed to two primary drivers: a pullback in consumer spending, a critical component of the US economy, and defensive corporate behavior. Companies are actively adjusting operations to mitigate risks from what the article describes as "frequent and unpredictable shifts in trade policy," which implies a dampening effect on business investment and confidence. The divergence between the headline Q2 figure and the weaker six-month average suggests that underlying economic momentum is waning, creating potential headwinds for the remainder of the year.

Key Decisions for Investors

• Given the reported slowdown in consumer spending, investors should review exposure to consumer discretionary stocks and consider the relative safety of consumer staples.
• It is crucial to scrutinize companies with significant international supply chains or high export dependency, as they are most exposed to the trade policy uncertainty cited as a primary cause for corporate caution.
• The data suggests a shift to a more defensive portfolio posture may be warranted, as the notable deceleration in first-half growth points toward a cooling macroeconomic environment despite the strong Q2 print.