The US economy grew faster than initially thought in the second quarter, in part driven by business investment in intellectual property such as artificial intelligence, but tariffs on imports continued to cloud the picture.

The upgrade to gross domestic product reported by the Commerce Department on Thursday also reflected upward revisions to consumer spending as well as business investment in equipment. That resulted in a measure of underlying domestic demand also being revised higher.

Given the wild swings in imports stemming from the manner in which President Donald Trump's sweeping tariffs have been implemented, including escalations and 90-day pauses, the GDP report is not a true reflection of the economy's health, economists said.

They expected the drag on GDP from import duties to become more evident in the quarters ahead.

"The strength in economic growth last quarter remains a mirage that is based on the fallout from the administration's economic agenda," said Christopher Rupkey, chief economist at FWDBONDS.

"Economic growth will slow to stall-speed once the tariff effects on imports wash out in the third quarter."

GDP increased at a 3.3 percent annualised rate last quarter, the Commerce Department's Bureau of Economic Analysis (BEA) said in its second estimate.

The economy was initially reported to have grown at a 3 percent pace in the second quarter.

The economy contracted at a 0.5 percent pace in the January-March quarter, which was the first GDP decline in three years.

A front-loading of imports as businesses rushed to beat the duties pulled down GDP in the first quarter before snapping back as the flow of foreign merchandise ebbed.

Economists expect a lackluster second half, which would limit economic growth to about 1.5 percent for the full year. That reading would be down from 2.8 percent in 2024. (Reuters)