California kept its bragging rights as the world’s fourth-largest economy in the latest update on state-level business output.
The Golden State economy was producing goods and services at a nation-leading $4.215 trillion annual pace in the second quarter. That’s according to the latest estimates of gross domestic product by the Bureau of Economic Analysis released Friday, Sept. 26.
GDP is a broad measure of the production of goods and services, often seen as a yardstick of a region’s economic vibrancy. California’s economy was growing at a 4.3% annual rate at mid-year 2025.
This geeky economic statistic has morphed into political brownie points for the state by comparing California’s business output to the latest global GDP rankings from the International Monetary Fund.
The latest IMF report from April ranked the U.S. as the GDP leader, with an estimated output of $30.5 trillion for 2025. Next was China at $19.2 trillion and Germany at $4.7 trillion.
Theoretically speaking, if California were viewed as a nation, its economy ranks No. 4 on this vanity totem pole – just ahead of India ($4.187 trillion) and Japan ($4.186 trillion). Yes, there’s only a $29 billion gap among the three economies.
The next major twist in this GDP drama will be the release this autumn of fresh IMF numbers. The update could reshuffle California’s global standing.
Output jam
It seems likely that India’s rapidly growing economy will eventually break the logjam with California and Japan. But will it happen in 2025?
The global economy typically experiences ebbs and flows, but the uncertainty of 2025 stands out. The White House’s rewriting of international trade policies is a huge wild card.
Major swings in U.S. tariffs on imports introduced significant uncertainty into global economic performance. That makes forecasting output problematic..
The Indian economy is booming, with 7.8% annualized GDP growth in the second quarter. But remember that these global scorecards are graded in U.S. dollars. And India’s rupee had lost 4% of its value to the American dollar so far in 2025. That dip may hurt its international grade.
Why are experts and currency traders anxious about India? U.S. trade policies will dent the country’s growth.
U.S. tariffs of up to 50% slow what India sells to American consumers. Additionally, the White House recently imposed various limits on U.S. firms using foreign workers, and India is a hot spot for technology workers.
In Japan, its economy was growing at a 2.2% annual pace at mid-year 2025. Its economy has been in a long funk tied to an aging and stagnant population. U.S. tariffs also add to their headaches.
But for the GDP scorecards, Japan’s 2025 ranking should be helped by a stronger currency. The yen has appreciated 5% vs. the U.S. dollar in 2025.
Domestically speaking
California is performing well compared to its domestic peers – and the nation as a whole.
My trusty spreadsheet’s review of state-by-state GDP results shows that California’s 4.3% GDP growth after inflation for the second quarter ranked 12th best among the states. The Golden State also topped the nation’s 3.8% GDP expansion rate.
The nation’s top performers were North Dakota at 7.3%, Texas at 6.8%, Kansas at 6.7%, New Mexico at 5.7% and Wyoming at 5.3%. Two state economies shrank: Arkansas, off 1.1%, and Mississippi, off 0.9%.
It’s a vast improvement over the first quarter when California’s GDP was flat. However, that shaky performance still ranked 16th best, as the nation’s business output fell at a 0.6% annual rate. In early 2025, the economy was adapting to the new administration’s unorthodox business approach.
California had economic momentum coming into the year. For all of 2024, California ranked 12th in GDP growth, at 2.9%, surpassing the nation’s 2.4% expansion.
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com