The rate of expansion of the US economy (which is cited as an annualised figure) hit its best level of performance since 2014 in the second quarter of 2018 according to data from the US Commerce Department. The figure came in at 4.1% and was boosted by strong consumer spending and better export figures as US exporters rushed to get goods out before importing markets slap retaliatory tariffs on US product as the trade war hots up.
There was quite a leap in consumer spending which rose from 0.5% in Q1 to 4% in the latest quarter. Exports of US goods saw a 9% rise over Q1, but are likely to be adversely hit by foreign countermeasures going forward. Nevertheless, the export performance was the best seen since Q4 2013. The boost in export activity put 1% on GDP and was spurred by the agricultural sector trying to get produce into importing markets before tariffs are imposed (notably on soybeans destined for China).
The economies which are subject to US tariffs (originally on aluminium and steel products) have lagged behind the US in imposing their own measures, partly because the US acted first and secondly because they hoped by allowing time the US policy would be reversed.
The average quarterly growth (on an annualised basis) stands at 2.2% for the period from 2012 to 2017 and whilst the current growth is strong it is hardly “amazing” as described by President Trump – it hit quarterly growth rates of 5.1 and 4.9% in Q2 and Q3 of 2014, for example.
Analysts remain cautious about future US growth prospects which will be harmed if the trade war intensifies. They also point out that the current data is flattered by a $1.5 trillion tax cut which handed money to big businesses and richer families with some trickle down to those of humbler means.