U.S. economy surges to 4.1% growth rate in Q2

The U.S. economy surged in the April-June quarter, growing at an annual rate of 4.1%. That’s the fastest pace since 2014, driven by consumers who began spending their tax cuts and exporters who sought to get their products delivered ahead of retaliatory tariffs.

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The Commerce Department reports that the gross domestic product, the country’s total output of goods and services, posted its best showing since a 4.9% gain in the third quarter of 2014.

President Donald Trump predicts growth will accelerate under his economic policies. But private forecasters cautioned that the April-June pace is unsustainable because it stems from temporary factors. The rest of the year is likely to see good, but slower growth of around 3%.

In emailed commentary, CIBC chief economist Avery Shenfeld provides further insight on why the current pace won’t last.

For example, healthy exports drained inventories, so final sales (GDP excluding inventories) registered a 5.1% advance in Q2, he wrote. Further, consumer spending has see-sawed since Q4, he says, with strong post-hurricane spending that quarter, subsequent weak spending in Q1 and now a bounce back.

“Overall, these are definitely big numbers, but not unexpectedly so,” he says, referring to today’s numbers. He adds that the data shouldn’t much alter views on the Fed or the second half outlook, saying, “Inventories will be rebuilt in Q3, but exports will likely be softer.”

Also read:

Republicans aim to make individual tax cuts permanent

U.S. tax reform affecting Canada’s competitiveness, growth: OECD

Staff, with files from The Associated Press

The Associated Press is an American not-for-profit news agency headquartered in New York City.