According to official statistics released on Friday, the American economy achieved a 4.1 percent annualized growth rate in the second quarter. This represents the highest rate of growth seen in nearly four years. Despite worries of a general trade war with China, trends appear to point toward a strong third quarter as well.
The high growth that occurred in the second quarter was the result of several economic factors acting in unison. Spending, both governmental and consumer, increased over the course of the quarter, with consumer spending advancing 4 percent over the previous year. Business investment growth slowed, but remained strong at a 5.4 percent rate of increase over the previous year, compared to 8 percent in the first quarter.
The second quarter’s GDP growth was also driven by a closing of the trade gap between the United States and the rest of the world. This development was likely a result of the various tariffs that have been enacted by the current administration over the course of this year. These tariffs, though producing GDP growth through a restriction on foreign imports, have raised concerns about a general trade war that could harm US exports. The beginnings of such a development may be seen in the fact that businesses slowed inventory investment during the second quarter.
Nevertheless, the outlook for the third quarter remains generally positive. Continued business investment as a result of last year’s tax cuts, paired with increased consumer spending facilitated by a tightening labor market and wage growth, will likely continue to drive growth into the coming fiscal quarter. Analysts and economists do expect GDP growth to slow somewhat, given that a 4 percent growth rate is difficult to sustain. Even with a slowdown, though, the growth of the economy in the coming quarter is expected to remain robust.