The Commerce Department released its initial estimate of second-quarter economic growth on Friday, providing the latest snapshot of the American economy.The Numbers
■ United States gross domestic product rose at an annual rate of 4.1 percent in the second quarter, up from 2.2 percent in the first three months of the year. It was the strongest quarter of growth since 2014.
■ Consumer spending rose 4 percent, but private investment fell slightly as the housing market cooled.
■ Exports rose 9.3 percent, driven in part by a surge in soybean shipments tied to President Trump’s trade policies.
■ Consumer prices rose at a 1.8 percent annual rate.The Takeaway
Economic growth surged in the second quarter — but don’t expect the boom to last.
The second-quarter acceleration was widely anticipated by economists, a result of a confluence of events unlikely to recur. Most economists expect growth to slow in the second half of the year.
Still, recent data does suggest that the pace of growth has picked up this year. Some economists think full-year growth in gross domestic product could hit 3 percent in 2018 for the first time in the nearly decade-long recovery. The second quarter was the first time since 2014 that economic growth topped 4 percent in a quarter; the economy reached that level or higher just four times during the eight years of the Obama administration.
“The bottom line is that the economy is doing better,” said Diane Swonk, chief economist for the accounting firm Grant Thornton.
Mr. Trump didn’t wait for the numbers to be released to herald rosy news. At an event in Iowa on Thursday, he said he was expecting very strong result, noting predictions that ran to 5 percent or higher.
“We’ll take anything with a four in front,” he said.Trade Distortions
Friday’s figures were pumped up by a surge in exports, which accounted for a quarter of the total growth for the quarter. Paradoxically, the export boom was driven in part by mounting trade tensions, which led foreign buyers to stock up on American products before their governments imposed tariffs.
The trend is particularly clear in exports of soybeans, which were up more than 50 percent in May from a year earlier. Those buyers presumably didn’t want more soybeans than usual — they just wanted them sooner. Exports will almost certainly slump in the third and fourth quarters, and will turn into a drag on overall G.D.P. growth.
“We’re getting explosive growth in the second quarter because of trade,” said Ellen Zentner, chief United States economist for Morgan Stanley. “You’ve got a big hole on the other side of that.”A Stimulating Trend
Friday’s strong figures also reflected an increase in government spending tied to the budget deal that Congress passed this year. Federal spending rose at a 3.5 percent rate in the second quarter. The effects of the spending deal won’t be quite as short-lived as the trade bump, but they are likewise temporary; economists think the impact on growth will peak late this year.
For a better sense of the underlying pace of growth, economists often look at an alternative measure that strips out trade, government spending and the volatile inventories component. That measure, known as “final sales to private domestic purchasers,” rose 4.3 percent in the second quarter, up from 2 percent in the first three months of the year.
Government spending isn’t the only policy elevating economic growth. Republican tax cuts are probably also playing a role, although the effects are hard to quantify. Consumer spending rebounded in the second quarter after slumping in the first; business investment was solid, though it slowed a bit from the first quarter.
Whether those policies are a good idea is another question. Many economists question the wisdom of passing what amounts to a deficit-funded stimulus package when unemployment is low and the economy is strong. Few outside the White House think a growth rate of 4 percent is sustainable in the long term.The View From Washington
Even with all the caveats, Friday’s report is good news for Mr. Trump, and for Republican congressional candidates hoping that the strong economy will improve their chances in the midterm elections this fall. The government won’t release its initial estimate of third-quarter G.D.P. until Oct. 26, just over a week before Election Day, and after many voters will have made up their minds.
The new numbers are unlikely to surprise Federal Reserve policymakers, who are expected to leave interest rates unchanged at their meeting next week. The report showed that inflation slowed a bit in the second quarter but remains close to the Fed’s 2 percent target. Faster growth could make it more likely that the Fed will stick to its policy of gradual rate increases, despite recent hints from Mr. Trump that he would prefer to see rates stay low.