Core Insights - The apparent growth in the US GDP for Q2 is misleading, primarily due to a significant drop in imports which artificially inflated the overall data, masking a slowdown in domestic demand [1][2][4] - Morgan Stanley's report indicates that the Q2 GDP grew at an annualized rate of 3.0%, surpassing market expectations of 2.5%, but this figure is heavily distorted by trade fluctuations [2][4] Domestic Demand and Consumption - The core indicator of domestic economic strength, private final domestic purchases, saw a sharp decline in growth from 2.7% the previous year to 1.2%, indicating a cooling in both household consumption and business investment [5] - Consumer spending showed a modest recovery, with actual personal consumption rising from 0.5% in Q1 to 1.4% in Q2, yet it remains significantly below 2024 levels [5] Investment Trends - Non-residential fixed investment growth significantly slowed in Q2, with construction investment declining by 10.3% following a 2.4% drop in Q1, and residential investment also fell by 4.6% [6] - Unexpectedly, business investment related to artificial intelligence underperformed expectations, with declines in power plant investments and a slowdown in data center and IT investments [6] Economic Outlook - Despite the better-than-expected Q2 GDP data, Morgan Stanley maintains a forecast of economic slowdown, predicting that the negative impacts of restrictive trade and immigration policies will outweigh the benefits from fiscal policy and deregulation [7] - The forecast for Q4 2025 shows a year-on-year growth rate of 1.0%, with 2026 growth expected at 1.1%, significantly lower than the strong performance anticipated in 2024 [7]