U.S. gross domestic product (GDP) growth rebounded in the second quarter of 2018, according to new data from the Bureau of Economic Analysis (BEA). Specifically, real GDP, which measures the value of the production of goods and services in America adjusted for price changes (inflation), increased at an annual rate of 4.1 percent in Q2. That is a welcome turnaround from Q1’s (upward-revised) 2.2 percent pace of expansion and the best quarter for economic activity since Q3 2014. A big factor behind Q2’s acceleration in GDP growth was stronger consumer spending, as personal consumption expenditures rose at the quickest rate in almost four years.
The personal saving rate, though, fell to 6.8 percent in the second quarter and credit card usage increased markedly, suggesting that faster wage growth may be needed for consumer spending to stay elevated. Exports and nonresidential fixed investment also provided a boost to economic activity in Q2. Business investment remained solid thanks to tax reform, a reduced regulatory burden, and general confidence in the economy, while the uptick in foreign trade might have simply been due to exports being carried forward in anticipation of further retaliatory tariffs. Altogether, this was another good but not great GDP report that is in line with the recent seasonal pattern of Q1 weakness followed by a sharp Q2 rebound. It is also worth remembering that this is only the first estimate of Q2 GDP growth, meaning that significant revisions are possible over the next few months.
Sources: Econoday, U.S. DoC, Twitter, Bloomberg, FRBSL
Post author: Charles Couch