Those expecting a big boost in the US economy will have to wait a little longer. The Bureau of Economic Analysis reports that second-quarter GDP increased at an annualized rate of 2.6% over Q1, which had only managed 1.2% annualized quarter-on-quarter growth. That improvement met analysts’ expectations, but it leaves the US economy chugging along in the same range of growth seen over the last two-plus years — acceptable but hardly spectacular.
On the plus side, it does serve as a reminder for Republicans to get to work on their economic agenda:
Real gross domestic product increased at an annual rate of 2.6 percent in the second quarter of 2017 (table 1), according to the “advance” estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 1.2 percent (revised). …
The increase in real GDP in the second quarter reflected positive contributions from personal consumption expenditures (PCE), nonresidential fixed investment, exports, and federal government spending that were partly offset by negative contributions from private residential fixed investment, private inventory investment, and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased (table 2).
For a little perspective on this growth rate, BEA supplies a handy chart:
Even the good news isn’t necessarily all good. Federal government spending provided a significant boost (2.3% increase), although that reflects a lot of defense spending (5.2% increase). Consumer spending bounced back from Q1’s 1.9% to 2.8%, but it’s the fourth straight quarter below 3%. Exports increased by 4.1% even after Q1’s big upward swing of 7.3%, while imports increased at a slower pace (2.1%) over Q1 (4.3%).
One potential warning sign is in private domestic investment, a signal of future growth. That measure has been relatively volatile, and ended up negative in 2016 as well as in Q1. It improved in Q2, but only showed 2.0% annualized growth. The good news there is that nonresidential equipment purchases increased 8.2%, its best quarter in over a year. There does not appear to be much change on inventory investment, however, as final sales of domestic product exactly matched the overall GDP growth. It’s an overall solid result, but it’s not hinting at significant change either.
The Associated Press offers a slightly sunnier view of the report:
The 2.6 percent growth in the second quarter was the fastest pace since the economy expanded at a 2.8 percent rate in the third quarter of last year.
Much of the strength in the April-June period came from consumer spending, which grew at a 2.8 percent rate, up from a 1.9 percent growth rate in the first quarter. Consumer spending accounts for 70 percent of economic activity. The economy also benefited far more modest inventory reductions, which was a big drag on first quarter growth. …
Even with the spring rebound, analysts believe the economy will be unable to meet the ambitious targets set by Trump. For this year, many analysts believe growth will come in around 2.2 percent, essentially where growth has been since the recovery began in mid-2009.
During last year’s presidential campaign, Trump attacked the Obama administration’s economic record and said he could jump-start growth through a program of tax cuts for individuals and businesses, regulatory relief, tougher enforcement of trade laws to lower U.S. trade deficits and an increase in spending on infrastructure projects.
True, but it’s also worth pointing out that nearly none of Trump’s economic plan has been put into place yet. Naively or not, the assumption was that Trump and the Republican Congress could get the economic plan in place within the first 100 days. They did roll back some of the later Obama-era regulations through the use of the Congressional Review Act, but have stalled on everything else ever since. Now that they’ve failed on ObamaCare repeal, Republicans will turn to tax reform, which is the key pillar in Trump’s economic plan.