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Economy & Business

GDP Growth Hits 4.1 Percent

President Trump speaks at the South Lawn of the White House, July 27, 2018. (Carlos Barria/Reuters)

Initial estimates suggest that U.S. GDP grew at a 4.1 percent annualized rate in the second quarter of 2018, an assuredly positive development that economists suggest should nevertheless be tempered by a recognition of the impact of a shifting domestic political environment.

The strong 4.1 percent estimate, released by The Bureau of Economic Analysis Friday, is largely the result of a one-time export surge fueled by firms eager to offload inventory before looming tariffs come into effect and foreign buyers equally happy to avert paying higher taxes on their purchases.

Fearing the implementation of stiff tariffs on agricultural and industrial goods, foreign buyers drastically increased their purchases of American soy beans in the second quarter, bringing exports of the crop up more than 50 percent from last May and increasing top-line GDP numbers. Total exports increased 9.3 percent year-over-year, in large part due to the surge in soy-bean sales.

While the export surge undoubtedly played a role in the strong growth, the likes of which hasn’t been seen since 2014, a significant increase in household consumption — a solid indicator of economic health — also drove a good deal of the top-line growth increase.

Conversely, business investment, another indicator of long-term, sustainable growth, stagnated in the second quarter. Flagging business investment is a concerning development for proponents of the GOP tax-reform package passed last fall, many of whom predicted that the legislation would drive continued investment for years following its passage.

“Business spending is not picking up the way proponents of the tax cut had hoped,” Michael Gapen, chief United States economist for Barclays, told the New York Times. “We could be putting ourselves in the position where we get a boom followed by a bit of a bust.”

Despite the economy’s various weak points, including shrinking housing sector, the report will likely prove advantageous for the Trump administration.

Speaking on the White House lawn Friday morning, Trump championed the growth numbers and predicted the trend would continue in perpetuity.

“We’re going to go a lot higher,” said Trump, just one day after announcing progress toward clearing the impasse with Europe caused by his tariffs. “As the trade deals come in one by one, we’re going to go a lot higher than these numbers, and these are great numbers.”

NOW WATCH: ‘Trump Predicts Growing GDP’

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