The U.S. economy grew at its fastest pace in nearly four years in the second quarter as consumers boosted spending and farmers rushed shipments of soybeans to China to beat retaliatory trade tariffs before they took effect in early July.President Donald Trump, who ahead of Friday’s release of the Gross Domestic Product (GDP) report had promoted the notion that second-quarter growth would be robust, declared victory.
“We have accomplished an economic turnaround of historic proportions.These numbers are very, very sustainable,” President Trump told reporters.
The U.S Commerce Department said the country’s Gross Domestic Product (GDP) increased at a 4.1 percent annualised rate adding that it was the strongest performance since the third quarter of 2014.
January-March quarter GDP growth was revised up to a 2.2 percent pace from the previously reported 2.0 percent rate to account for updated information and methodology improvements.
Compared to the second quarter of 2017, the U.S economy grew 2.8 percent with output expanding 3.1 percent in the first half of 2018, putting the economy on track to hit the Trump administration’s target of 3 percent annual growth.
Economists also cautioned against putting much weight on the surge in second-quarter growth as one-off factors, including a $1.5 trillion tax cut package, were behind the growth spurt.
The soybean boost is likely to reverse in the coming quarters and the fiscal stimulus is seen fading in 2019.
“Pop the champagne today, but don’t get used to it, growth going forward has a lot of headwinds. Unless you cut taxes again, there won’t be additional tax cut monies to line company and consumer pocket books,” said Chris Rupkey, Chief Economist at MUFG in New York.
It would be recalled that the United States imposed 25 percent duties on $34 billion worth of Chinese goods which took effect on July 6, thereby provoking a similar response from Beijing, which targeted soybeans and other agricultural products as well as U.S.-made cars.
Peace PIAK
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