The second-quarter numbers in the U.S. are the kind that make you double-check your column. Earnings per share at S&P 500 companies rose 53% from a year earlier, while sales rose nearly 16% , according to LSEG data. The rise was boosted by one-off investment gains at Amazon and Alphabet , but even without them, profitability posted its biggest increase since the fall of 2021.
The sentiment is also reflected in forecasts. Almost twice as many companies upgraded their profitability estimates for the current quarter compared to those that downgraded them, completely reversing the picture that prevailed a year ago.
According to the Wall Street Journal , the rise is fueled by three factors. Large investments in Artificial Intelligence , federal spending and tax refunds paid by businesses. To these is added a fourth, more indirect one. The rise in the stock market and high real estate values create in households a feeling of wealth that allows them to continue shopping despite the increased prices.
Tariff rebates are worth paying close attention to, as they offer a significant but temporary boost. Apollo Global Management estimates they could account for more than 4% of third-quarter economic growth , adding about 0.2 percentage points to a pace that the Atlanta Fed puts between 4% and 5%.
The examples from the companies themselves are telling. Abercrombie & Fitch upgraded its annual forecast as demand remained strong even after sales were curtailed, and it expects about $120 million in tariff refunds. Garmin said $21 million in refunds boosted its profit margins.
At retail, consumers are still buying electronics, toys, clothing and home appliances, despite higher fuel prices and lingering inflationary pressures. Dollar General reported its fifth straight quarter of increased foot traffic and a 3.5% rise in comparable sales, while Best Buy and Target also reported stronger sales.
The picture, however, is not uniform, and the most interesting signal comes from the industry’s largest company. Walmart reported its slowest sales growth in more than six years , despite raising its annual forecast. Some of the roughly $2.9 billion it received in tariff rebates was used to lower prices, a move that suggests the company sees price as a critical factor in retaining its customers.
Apollo Chief Economist Torsten Schlock sums up the balance. As long as the AI investment boom, high stock valuations and strong income growth continue, consumption could remain resilient. He warns, however, that if the big AI investments don’t live up to expectations , the economic outlook could be significantly altered.
