U.S. economy grows 4.1%, the fastest pace since 2014

Trump Breaks Tradition on GDP Figures

That marks the fastest pace of growth since 2014, and was driven by consumers who began spending their tax cuts and exporters who rushed to get their products delivered ahead of retaliatory tariffs. But many think the annual 4.1 percent growth rate last quarter is likely the high point for any one quarter.

THE FACTS: Trump is correct that a lower trade deficit helped growth in the April-June quarter, but it's not necessarily for a positive reason.

President Donald Trump said he was thrilled with what he called an "amazing" growth rate - the strongest quarterly figure since 2014 - and said it wasn't "a one-time shot".

Few economists doubted that growth could accelerate after the Trump administration's tax cuts were passed last year, and Congress approved a big increase in government spending earlier this year.

Consumer spending, which accounts for 70 percent of economic activity, rebounded to a 4 percent annual growth rate after turning in a lackluster 0.5 percent gain in the first quarter.

"We're getting explosive growth in the second quarter because of trade", economist Ellen Zentner of Morgan Stanley tells the Times.

PRESIDENT DONALD TRUMP: At 9.4 percent - so that's a very tremendous increase.

About 25 percent of this quarter's growth is due to exports, with overseas companies buying up US products before new tariffs set in. Notably, consumer spending perked up quite a bit, rising at an annualized 4.1% rate in Q2 - the fastest since 2014 - and almost double the gain in the previous quarter.

The trade dispute with China, for example, prompted buyers to rush purchases of US soybeans before Chinese retaliatory tariffs raised costs for that key market for America's largest agricultural export, according to Bankrate.com analyst Mark Hamrick.

The strong second-quarter growth reflected large increases in orders of durable goods, investment in non-residential construction, exports, intellectual property, and government defense spending. Federal-funds futures were pricing in a 93% probability for another 25-basis-point increase in the central bank's target rate (currently 1.75%-2%) at its September 25-26 meeting, unchanged from Thursday, according to Bloomberg.

GDP numbers are out this morning. But most economists forecast it will fall back below 3 per cent soon afterward. His two-term average of 1.6 percent annual growth is the worst among post-World War II presidents.

First-quarter gross domestic income, adjusted for inflation, was revised to a 3.9 percent gain from a previously reported 3.6 percent. Consumer spending was also solid.

"With the year-over-year change in the personal consumption expenditures (PCE) deflator (2.2 percent) as well as the core PCE deflator (1.9 percent) up relative to the past four quarters, the case remains for the Fed to raise the benchmark funds rate". Growth has averaged just 2.2 percent since mid-2009 through the end of a year ago, the same as previously reported.

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