Economy grew at 4.1 rate in second quarter, best in nearly four years
The economy grew at a 4.1 percent annual rate in the second quarter, the Bureau of Economic Analysis reported Friday, the best such growth rate in nearly four years. Strong consumer spending and a surge in exports helped drive up growth, as measured in Gross Domestic Product and adjusted for inflation. Friday’s report was one of the most anticipated in years, thanks to forecasters' projections for a growth rate of 4.2 percent. It fell just short of those expectations, but nevertheless easily beat the 2.2 percent growth rate of the previous quarter.
President Trump, who has repeatedly promised to raise GDP growth to 3 percent and keep it there, boosted expectations for the report during a speech in Granite City, Ill., on Thursday. “These are unthinkable numbers,” he said of the possibility of growth around 4 percent. On Friday, he sought to immediately capitalize on the good news with a speech on the report. Friday’s report is just the first estimate of growth in the quarter. It will be revised twice, perhaps significantly, in the months ahead. Trump’s tax cuts likely provided an one-time boost to consumer spending, and thus GDP, by sending more money back to households. Friday's report showed household spending zooming to a 4 percent clip, the strongest in years. Net exports contributed more than a full percentage point to the overall growth rate in the second quarter, a boost that may reflect farmers and manufacturers, fearing a trade war, trying to ship their products before getting hit with tariffs.
Despite those one-off factors, though, the details of the report suggested that underlying growth is solid. "The fundamentals for the U.S. economy are good in mid-2018," said PNC chief economist Gus Faucher. Stripping out government purchases and exports, GDP growth was even stronger than the headline would suggest, at 4.3 percent. And business investment was also robust, at 7.3 percent. Bigger capital expenditures, which drive future growth, are exactly what the Trump administration wanted to see from the business tax cuts. “Over the last six months, tax reform and regulatory relief have sparked the robust manufacturing job growth we predicted, improving lives and livelihoods across the country," said Chad Moutray, chief economist for the National Association of Manufacturers.
Housing construction, on the other hand, shrank for a second straight quarter. Before Friday's release, officials at the Federal Reserve had expected growth for 2018 to wind up just shy of 3 percent, at 2.8 percent. Following the strong GDP numbers, High Frequency Economics projected that growth would come in at 3 percent in the third and fourth quarters, before fading in 2019. If final 2018 growth finished above 3 percent, it would be the strongest year since 2005. Friday's report also showed that, without inflation adjustments, GDP reached the $20 trillion mark this year for the first time.
https:// www.washingtonexaminer.com/policy/economy/economy-grew-at-4-1-rate-in-second-quarter-best-in-three-years