U.S. economy grows 4.1% in 2nd quarter

Larry Hoffman
August 1, 2018

"We believe quarter two will represent a growth peak as the boost from tax cuts fades, global growth moderates, inflation rises, the Fed tightens monetary policy and trade protectionism looms over the economy", said Gregory Daco, chief USA economist at Oxford Economics.

"Economists caution the robust growth was a result of one-time factors and is likely to be short-lived", the Post wrote.

On Friday, the government estimated that the economy did in fact expand at a 4.1 percent annual pace in the second quarter, up from a 2.2 percent rate in the first three months of the year.

But Trump did not urge caution on that front, instead pointing to a decrease in the U.S. trade deficit driven by those exports, calling it "one of the biggest wins" in the economic report. "We are now on track to hit an average GDP annual growth of over 3 percent and it could be substantially over 3 percent". But Trump's rosy take on the long-term health of the USA economy also stood in contrast to assessments that the 4.1% growth last quarter was boosted by a spike in exports driven by trade war fears. "Going forward it's quite likely that we could see economic growth slowing from this sizzling rate in the second quarter".

Forecasters expect healthy consumer spending in the second half of this year but a slower pace than in the spring.

His remarks followed events Thursday in Iowa and IL, where Trump falsely repeated a claim that the USA economy is the best "we've ever had" and incorrectly asserted that Canada's trade market is "totally closed".

"GREAT GDP numbers just released".

"Trump has to be careful not to overhype this".

Trump claimed that the USA has been "abused like no nation has ever been abused on trade before", including by United States allies. "Wage growth has been anemic".

While the majority of economists warn that Trump's trade war will hurt US growth, they say it temporarily boosted growth in the spring as foreign firms rushed to make purchases before the tariffs took effect.

Larry Kudlow, director of the National Economic Council, said at a press event Friday that the growth is sustainable because it is built on an explosion in energy exploration and mining and a 9 percent boost in business investment.

Soybean exports exploded in the second quarter, as customers in several countries scrambled to snatch up supplies before new foreign taxes on US soybeans went into effect, part of a broad retaliation against Trump's tariffs on a range of foreign products.

For now, strong growth in the second quarter will keep the Federal Reserve on course to raise interest rates two more times this year.

Trump said the higher growth will carry on.

Consumer spending, which accounts for about 70 percent of economic activity, reached a 4 percent annual growth rate after a lackluster 0.5 percent rate in the first quarter.

Trump cast the growth under his administration as far stronger than what occurred under Barack Obama or George W. Bush, but the data does not back that up.

Corporate capital investment grew 7.3 percent. The U.S. economy grew by 2.9 percent in 2015 and 2006, and more than 3 percent in 2004 and 2005.

Twitter shares plunged more than 11 percent in pre-market trading on Friday, after the social media company revealed quarterly earnings that matched the Wall Street expectations.

"Trump deserves some credit".

Consumers began spending their higher take-home pay on autos and other big-ticket items, spurred by the $1.5 trillion tax cut Trump pushed through Congress in December.

"We will come pretty close to stalling out in 2020 because the growth we are seeing now is not sustainable", Zandi said.

Most economists expect the growth will fade from here as exports slow and the stimulus diminishes.

"Growth is likely peaking", said Bricklin Dwyer, senior US economist at BNP Paribas.

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