Washington, The US economy grew at a 4.1 per cent rate, the strongest pace in nearly four years during the second quarter, powered by a rebound in consumer spending, exports and firm business investment, the Commerce Department said on Friday.
US President Donald Trump cheered the numbers, holding an impromptu press conference outside the White House to tout the “amazing” growth and said “this is just the beginning”.
Gross Domestic Product (GDP): the value of all goods and services produced across the economy, rose at a seasonally and inflation-adjusted annual rate of 4.1 per cent from April through June. That was a pickup from the first quarter’s revised growth rate of 2.2 per cent, the New York Times reported.
“We’re going to get a lot higher than these numbers and these are great numbers,” Trump said, flanked by his economic team. “We are now on track to hit an average GDP annual growth of over 3 per cent and it could be substantially over 3 per cent,” said the President.
“These numbers are very, very sustainable. This isn’t a one-time shot.”
Economists surveyed by The Wall Street Journal expected a 4.4 per cent growth rate. The second-quarter growth reading was the strongest since the 4.9 per cent annual rate reported for the third quarter of 2014.
Compared to the second quarter a year ago, output grew 2.8 per cent.
Figures showed that consumer spending rose at a rate of 4 per cent in the second quarter, up from the 0.5 per cent rate seen in the previous three months.
Exports grew at the fastest pace since the fourth quarter of 2013, as companies sought to avoid the new tariffs.
The robust report made it highly likely the Federal Reserve will continue gradually raising short-term interest rates to prevent the economy from overheating. Central bank officials had raised rates twice this year and pencilled in two further increases this year and three in 2019, Efe news reported.
The Fed is widely expected to leave its benchmark rate unchanged at its policy meeting next week and then increase it in September by a quarter percentage point to a range between 2 per cent and 2.25 per cent.
Trade played a large role in the second quarter’s bumper growth. Net exports added 1.06 percentage point to the quarter’s 4.1 per cent GDP growth rate, as exports rose strongly.
Earlier this month, the Commerce Department said US soybean exports surged in the second quarter, delivering an outsize boon to economic growth even as China shifted much of its sourcing to Brazil in response to its worsening trade relations with the US.
The export rally likely reflected efforts by buyers to get their soybeans before China’s 25 per cent retaliatory tariffs on US soybeans, which hit in July.
Government expenditures were up at a 2.1 per cent annual rate in the second quarter.
The $1.5 trillion tax cut passed by Congress late in 2017 was part of President Donald Trump’s plan to boost economic growth to the above 3 per cent annual growth rate that marked the robust expansions of the 20th century.
Friday’s report showed the economy boomed in the second quarter of 2018, although many economists and policymakers believe the pace is unlikely to be sustained in the long run, given the ageing of the population and slow productivity growth of recent years.