The US economy roared to life in the second quarter, posting the fastest annual growth rate in almost four years and the strongest among industrialised nations, according to government data released yesterday.
Gross Domestic Product expanded by an annual rate of 4.1%, matching analyst expectations, as Americans bought more cars and as foreign sales of oil and soybeans, which now face Chinese tariffs, gave exports the biggest boost in more than four years, the Commerce Department reported.
The result showed the world’s largest economy – now valued at $20tn – was in robust health, in part accelerating after the injection of stimulus and tax cuts by President Donald Trump and Republican lawmakers.
But the preliminary growth estimate – which will be revised as more complete data becomes available – did not fulfil the wildest dreams of some at the White House, however, as Trump touted the possibility of growth as high as 5%.
“We’ll take anything with a four in front,” Trump had said on Thursday at an event in Iowa.
And White House trade adviser Peter Navarro said in an interview just before the numbers were released that growth would hit a rate “the likes of which we have not seen since the 1990s.” He credited Trump’s aggressive trade policies and denied companies were being hurt by tariff measures.
The White House is counting on faster growth to pay for December’s sweeping tax cuts by generating higher revenues, but economists say there is little chance such rapid expansion can be sustained on an annual basis and federal tax receipts already are plummeting.
Second quarter GDP rose at the fastest pace since the 4.9% jump seen in the third quarter of 2014.
And growth in the January-March quarter was revised up to 2.2% from the previous 2% estimate, according to the report.
With more money in their pockets after a decade of job growth and falling unemployment, consumers’ spending shot up to its fastest pace since the end of 2014.
Purchases of goods jumped 5.9% – with the largest contribution coming from booming auto sales – while services rose 3.1%.
Americans spent liberally on health care, housing, utilities, restaurants and hotels, according to the Commerce Department data.
Meanwhile, exports of goods leapt 13.3% higher, the biggest increase since the fourth quarter of 2013.
But there were signs of distortion in export data due to the president’s multifront trade wars.
Higher exports were primarily driven by especially brisk sales of oil and soybeans as Chinese importers stockpiled US goods before Beijing imposed retaliatory tariffs on US exports in July.
Economists say exports are due to fall in the third quarter, weighing on the economy. Meanwhile, imports rose only 0.5%, the smallest increase in two and a half years. Also contributing to economic growth, spending by state and local governments rose 1.4%.
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