WASHINGTON: US economic growth was a bit stronger than initially thought in the second quarter, notching its best performance in nearly four years and putting the economy on track to hit the Trump administration’s goal of 3 per cent annual growth.
Gross domestic product increased at a 4.2 per cent annualised rate, the Commerce Department said in its second estimate of GDP growth for the April-June quarter. That was slightly up from the 4.1 per cent pace of expansion reported in July and was the fastest rate since the third quarter of 2014.
The economy grew at a 2.2 per cent pace in the January-March period. The slight upward revision to growth last quarter reflected more business spending on software than previously estimated and less imported petroleum.
Stronger software investment and a smaller import bill offset a downward revision to consumer spending. President Donald Trump, whose administration has vowed to boost annual economic growth to 3 per cent on a sustainable basis, cheered the revised second-quarter data.
“Our country is doing great!” Trump tweeted.
The economy expanded 3.2 per cent in the first half of 2018, up from the 3.1 per cent estimated last month. Compared to the second quarter of 2017, output increased 2.9 per cent instead of the previously reported 2.8 per cent. Economists, however, cautioned that the second-quarter growth pace was unsustainable as it was largely driven by one-off factors.
In addition, the economy faces constraints such as low productivity and slow population growth.
The Trump administration’s $1.5 trillion tax cut package provided a jolt to consumer spending after it almost stalled in the first quarter and soybean exports to China were front-loaded to beat retaliatory trade tariffs.
There are signs some of the momentum was lost early in the third quarter. The government reported on Tuesday that the goods trade deficit jumped 6.3 per cent to $72.2 billion in July as a 6.7 per cent plunge in food shipments weighed on exports.
The Trump administration’s “America First” policies, which have led to an escalation of a trade war between the United States and China as well as tit-for-tat tariffs with the European Union, Canada and Mexico, pose a risk to the economy.
“We expect the pace of the expansion will cool in the second half of 2018, as the boost from fiscal stimulus starts to fade ... and trade protectionism weighs on activity,” said Oren Klachkin, lead economist at Oxford Economics in New York. — Reuters
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