"The consumer had a very slow start to a year but it looks like at the end of the second quarter it's going well. That's a big part of the economy," said Art Hogan, chief market strategist at Wunderlich Securities. He noted that the strength in consumer spending matches the surprisingly strong June jobs report.
U.S. retail sales rose a more-than-expected 0.6 percent in June with control retail sales also topping forecasts with a 0.5 percent gain, the Commerce Department said Friday. The control figure correlates to consumption in GDP, and excludes things like automobiles, gasoline, building materials and food services.
"On the whole, this morning's report is supportive of our outlook for a consumer-driven bounce back in second-quarter growth," Barclays analyst Rob Martin said in a note Friday.
Barclays raised its second-quarter GDP tracking estimate by 0.3 percent to 2.9 percent after the strong retail sales report.
MUFG's chief financial economist, Chris Rupkey, said the consumer spending data show the economy is in good shape. "Net, net, the economy is on fire at midyear with consumer spending pushing GDP to 3.0 percent in the second quarter," he wrote in a note.
JPMorgan economists said they were now forecasting GDP at 2.2 percent, and they noted that the much-higher level of consumption will probably not continue in the third quarter. "We now estimate that real consumer spending increased at a 4.5 percent pace in Q2, which would be the best quarterly showing for the expansion," wrote JPMorgan's chief U.S. economist, Michael Feroli.
The Atlanta Fed GDPNow model for real GDP growth in the second quarter of this year rose to 2.4 percent after the retail sales and consumer price index reports on Friday. The prior estimate from July 12 was 2.3 percent growth.
The more recently launched FRBNY Staff Nowcast model showed an increase in its annualized quarterly forecasts to 2.2 percent and 2.6 percent for the second and third quarter, respectively. The slight rise in expectations was due mostly to manufacturing data, particularly capacity utilization and industrial production, according to the latest FRBNY report. The model was launched by the New York Federal Reserve in April and is updated on Fridays.
Friday's data releases also showed industrial production rose 0.6 percent in June, topping analyst expectations for 0.2 percent. The consumer price index showed a fourth straight monthly increase in June to 0.2 percent, for a 1.0 percent increase over the last 12 months.
The final University of Michigan consumer sentiment for June was 93.5, but Brexit concerns lowered the initial July read to 89.5, according to a report Friday.
Separately, business inventories rose a more-than-expected 0.2 percent in May.
— CNBC's Patti Domm and Reuters contributed to this report.