Published: Tue, July 31, 2018
Worldwide | By Victor Meyer

US economy grows at the fastest pace since 2014

US economy grows at the fastest pace since 2014

"This president's economic policies are succeeding, and trade is a big part of that".

"In one line: Looks great; won't last", Ian Shepherdson, the chief economist at Pantheon Macroeconomics, said in a note.

The GDP numbers, released today, show an improvement over the first quarter's 2.2 percent growth.

Personal consumption was strong in the second quarter, probably aided by the reduction in taxes for many Americans and the increase in optimism about the economy, especially among Republicans. Now we're seeing the executive use those to the detriment, you know saying national security is the reason why we have to impose tariffs on our allies. Most significantly, China appears to have accelerated purchases of soybeans, crude oil, and other exports before new tariffs went into effect.

In 2019, he expects a solid 2.6% growth rate. He also touted record-low unemployment numbers among minorities and fewer Americans on food stamps. "As the trade deals come in one by one, we're going to go a lot higher than these numbers".

He pointed to new tax cuts, de-regulation, increased government spending and the continuing trade negotiations.

President Donald Trump is prematurely claiming he proved naysayers wrong in boosting USA economic growth.

While Friday's report showed the United States economy accelerating, the gains were in line with analyst forecasts - and were not out of proportion with some quarters in previous years.

On the two previous times that growth exceeded 4%, the economy grew at half that rate for the remainder of the year and finished the year just above 2% annual growth. Thus, the US exported 50 percent more soybeans in May 2018 than it had in May 2017.

"If economic growth continues at this pace, the US economy will double in size more than 10 years faster than it would have under either President Bush or President Obama", he said.

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"They say it nearly each and every time", he said.

But economists have begun to question whether it can continue at this pace in the face of trade tensions and rising rates.

Analysts said that increase was due to stockpiling by Chinese importers before Beijing's retaliatory tariffs on United States goods hit in July, which means trade is likely to fall off in the third quarter, dragging down the growth rate.

Consumer spending is being driven by the lower taxes and a robust labour market, which created an average of 215,000 jobs per month in the first half of this year.

The trade deficit in the second quarter dropped by $52 billion, adding 1.1 points to the GDP growth. Spending on equipment grew at an 8.5 per cent rate in the first three months of the year.

For now, strong growth in the second quarter will keep the Federal Reserve on course to raise interest rates two more times this year.

There were some signs of softness, however.

Trump called the narrowing of the trade deficit "one of the biggest wins in the report".

But just as Trump did before the government's May jobs report was released in early June, he chose to brag before Friday morning's release of the government's estimate of how fast the economy grew during the April-June quarter.

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