US Economy Grows In Q2; GDP Up 4.2 Percent

U.S. economic growth in the second quarter had its strongest performance in nearly four years, but there are signs that momentum is slowing down a bit.

Reuters reported that the second quarter numbers put the economy on track to reach 3 percent annual growth, something the Trump administration has promised to achieve this year.

The Commerce Department said on Wednesday (Aug. 29) in its second estimate of GDP growth that gross domestic product increased at a 4.2 percent annualized rate in the second quarter, the fastest since the third quarter of 2014. It was also reported that the economy grew at a 2.2 percent pace in the January-March period, which reflected more business spending on software than previously reported and less imported petroleum.

The economy expanded 3.2 percent in the first half of 2018, an increase from the 3.1 percent estimated last month. Compared to the second quarter of 2017, output increased 2.9 percent over the previously reported 2.8 percent.

But there are signs that some of the momentum has slowed in the third quarter. For example, the government reported this week that the goods trade deficit increased 6.3 percent to $72.2 billion in July, as a 6.7 percent fall in food shipments affected exports.

And while consumer spending has remained strong so far, the housing market continues to weaken early in the third quarter, with homebuilding rising less than expected last month and sales of new and previously owned homes going down.

In addition, the trade war between the United States and China, as well as the back-and-forth tariffs with the European Union, Canada and Mexico, could all have a negative impact on the economy.

“We expect the pace of the expansion will cool in the second half of 2018, as the boost from fiscal stimulus starts to fade … and trade protectionism weighs on activity,” said Oren Klachkin, lead economist at Oxford Economics in New York.