The U.S. economy grew 4.2 percent in the three months through June, slightly faster than initially reported and the most in four years.
The improvement of 10 basis points reflects more complete data than were available for last month’s calculation by the Bureau of Economic Analysis, including an improvement in commercial and industrial investments and a drop in imports, which are subtracted from gross domestic product.
The changes made up for a downward adjustment of 20 basis points in consumer spending, which along with government investment should “continue to anchor growth for the remainder of the year,” Pooja Sriram of British lender Barclays Plc said in a report. Consumer companies from cosmetics firms Estee Lauder to electronics giant Best Buy have benefited from shoppers loosening their purse strings after last year’s tax cuts, though some are cautious about the rest of 2018.
Economists surveyed by FactSet had predicted the second-quarter growth rate would remain at 4.1 percent, as did Bank of America. The Charlotte, N.C.-based lender is forecasting full-year growth of 2.9 percent this year and 2.7 percent in 2019, though economist Michelle Meyer said a potential trade war could be a “major drag.”
In addition to tariffs of 25 percent on $50 billion of Chinese imports, President Trump has threatened duties on as much as $450 billion more, accompanied by 25 percent levies on automobiles and vehicle parts, as he tries to shrink a trade imbalance that he says is bad for the U.S.
Trump, who has repeatedly promised to raise gross domestic product growth to 3 percent and keep it there, had touted the July report and labor-market improvements as proof that his economic policies are delivering the results he promised on the campaign trail. “We have accomplished an economic turnaround of historic proportions,” he wrote on Twitter at the time.
Consumer Confidence Index, just out, is the HIGHEST IN 18 YEARS! Also, GDP revised upward to 4.2 from 4.1. Our country is doing great!
— Donald J. Trump (@realDonaldTrump) August 29, 2018
Wednesday’s report is the second estimate of growth in the quarter, and it will be revised once more. In the meantime, economists are focusing on the current period, which ends in September. Morgan Stanley has estimated growth of 3.1 percent so far, while British lender Barclays calculated gains of 2.8 percent.
“A strong economy, in our view, is the president’s top accomplishment,” said Jaret Seiberg, an analyst with Cowen Washington Research Group, which has tracked federal policy for the past four decades. “The question is whether economic growth can continue to surpass 3 percent. We hear a growing number of voices in Washington and at the federal agencies who question the impact of the trade fights.”
The three months through September, in particular, might be affected by a rush during the previous quarters to import merchandise before the tariffs took effect, he noted.
“Absent a strong economy, the president might face more GOP defections,” Seiberg said, imperiling his agenda of loosening federal regulations to buoy the economy.
