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U.S. economic growth hits fastest rate since 2014, Trump rejoices

31 July 2018

Consumer spending, which accounts for 70 per cent of economic activity, rose to a 4 per cent annual growth rate after turning in a lacklustre 0.5 per cent gain in the first quarter.

Yet, even as he touted the benefits of future trade deals, analysts say the risks from tariff wars and a fading effect from tax cuts could limit the pace of growth going forward. Consumer spending was also solid. Central bank officials have raised rates twice this year and they are widely expected to leave its benchmark rate unchanged at the Fed's policy meeting next week and then increase it in September by a quarter of a percentage point, to a range between 2 per cent and 2.25 per cent.

Consumer spending is being driven by the lower taxes and a robust labour market, which created an average of 215,000 jobs per month in the first half of this year.

The president said he's confident next quarter's numbers will be even higher.

While there is broad agreement the economy performed well in the second quarter, economists have begun to question whether it can continue at this pace in the face of trade tensions and rising rates.

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"Trump has to be careful not to overhype this".

Consumers began spending their increased take-home pay on autos and other big-ticket items, spurred by the 1.5 trillion-dollar tax cut Mr Trump pushed through USA congress in December. "Wage growth has been anemic". Those gains would result from slashing the USA trade deficit "in half", Trump said.

Already announced tariffs are forecast to be only a slight drag on economic growth, unless more are imposed.

Trump also touted a decrease in the United States trade deficit in the most recent quarter, calling it "one of the biggest wins".

Today's Q2 GDP data showed that the economy expanded at a 4.1% rate.

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Trump said the higher growth will carry on. The second quarter figures included several one-time factors, that won't happen in the third quarter, according to economists. Trump has promised to boost GDP growth above 3% on a sustained basis, and his hope for the second quarter was "anything with a four".

Unlike in 2015, growth has accelerated this year, in part, because of the stimulus from Trump's deficit-funded tax cuts. House Minority Whip Steny Hoyer (D-Md.) recently credited the former president for the improving economy while unveiling an update to his job growth platform Monday.

"Real GDP 4.1 percent in the second quarter after 2.2 percent in the first quarter". But this spring, business investment in equipment was sluggish, chugging along at its slowest pace since late 2016. But, he says, that growth in spending will fizzle.

The senior U.S. economist at Societe Generale agrees.

Still, Silvia says, "you can have a very strong second quarter", but growth will slow to about 2 percent to 2.5 percent as the export picture turn negative.

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Associated Press writers Jill Colvin in Peosta, Iowa, and Granite City, Ill., and Hope Yen, Darlene Superville and Ken Thomas in Washington contributed to this report.

U.S. economic growth hits fastest rate since 2014, Trump rejoices