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US-ECONOMY-GROWTH-GDP-INDICATOR
US economy grew 4.2% in second quarter, faster than first reported
WASHINGTON, Aug 30, 2018 (BSS/AFP) – The roaring growth of the US economy
in the second quarter was even faster than first reported, with new numbers
showing a bigger boost in corporate spending, the government reported
Wednesday.
The uptick in business spending in the April-June quarter was sure to
comfort President Donald Trump and supporters of December’s sweeping
corporate tax cuts, who argue that lowering tax burdens will spur investment
and growth.
Gross Domestic Product advanced at an annual rate of 4.2 percent in the
second quarter, a tenth of a point faster than initial estimates last month
and the fastest growth in almost four years, according to the Commerce
Department.
The rate also was nearly twice the pace of first quarter growth,
surprising analysts who had been expecting a slight downward revision.
Many economists view the second quarter growth as a blip, juiced by one-
off factors unlikely to be sustainable. Estimates for growth in the third
quarter now hover around a still-robust three percent, putting Trump’s annual
growth target of three percent within reach for this year at least.
Economists also warn there are signs momentum slowed at the end of the
third quarter, with Trump’s tariff battles cutting into exports.
The effects of the tax cuts and recent stimulus are expected to begin to
wane soon, while rising interest rates and the US-China trade battle loom as
economic headwinds.
But Trump last month hailed the economy’s renewed vigor, claiming credit
for boosting growth with tax cuts and by aggressively confronting trading
partners.
“With profit margins expanding again and investment spending accelerating,
the outlook for the second half of the year is a solid one but accompanied by
rising inflation pressures,” RDQ Economics said in an analytical note.
Much of the second-quarter boom was due to a boost in exports as merchants
raced to buy American goods — principally soybeans and petroleum — ahead of
China’s retaliatory tariffs, which took effect in July. The pendulum is
expected to swing in the other direction in coming months.
MORE/HR/1012
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US-ECONOMY-GROWTH-GDP-INDICATOR 2 LAST WASHINGTON
– Softer consumer spending –
Corporate profits rose $72.4 billion, up from $26.7 billion in the first
quarter when many companies reported one-time accounting charges due to
changes in the tax laws.
Much of the upward revision in spending by companies reflected investment
in computer software, according to the department. Meanwhile, estimates for
the value of imports, notably petroleum, fell and federal and local
government spending moved up.
US defense spending also rose six percent for the quarter, the biggest
increase in nine years, five tenths of a percentage point faster than
previously estimated.
These gains offset what officials described as “widespread” downward
revisions to consumer spending, with small subtractions from purchases of
cars, furniture and gasoline, among other items.
Downward revisions in the housing sector, which has suffered declining
sales and construction this year, also weighed on the outcome.
The new estimate was based on a more complete set of data than previously
available and will be revised again next month.
With budget deficits ballooning, the White House is betting on faster
growth to help offset the cost of the tax cuts, which economists say is
unlikely.
Already in record territory, Wall Street again closed higher on Wednesday
as the S&P 500 and Nasdaq set new records. Investors appeared less moved by
the rosy economic figures than by mounting optimism in trade talks between
United States, Canada and Mexico, however.
BSS/AFP/HR/1015