Rebound in US economic growth in the Q2 mask that underlies weaknesses
The US economic growth recovered more than expected in the second quarter, but it exaggerated economic health because the decline in imports contributed most of the increase and domestic demand rose at the latest speed in 2-1/2 years.
Details of the Domestic Product Report Domestic Product The second quarter of Advance from Commerce on Wednesday refers to moderation in activities despite the strength suggested by the main GDP number.
Consumer expenditure, economic machinery, growing enough last quarter and business investment in equipment slowed down sharply after posing two digit growth in the January-March quarter.
Housing investment, which includes housing construction and home sales through the brokerage commission, is contracted for the second quarter in a row. Economists say the uncertainty of trade policy has made it difficult for the business to plan the long -term, impact on recruitment and with the effect of spillover on consumer expenditure.
President Donald Trump has imposed import tariffs while delaying a higher task to allow countries to negotiate trade agreements with the White House.
“The economy is not in the recession is good news. The bad news is that this is not a strong growth report that will make people confident about the economic prospects for the second half of 2025,” said Christopher Governor, Chief Economist at FWDBonds.
Gross domestic product increased at an annual level of 3.0% of the last quarter, said the Department of Economic Analysis Bureau. The economy was contracted at a speed of 0.5% in the January-March quarter, the first decline in GDP in three years.
Economists surveyed by Reuters have estimated rebound GDP at an annual level of 2.4%. The economic size rose to more than $ 30 trillion for the first time the last quarter before calculating inflation.
Hurriedly to defeat the duty to encourage imports in the first quarter, resulting in a trade deficit in record goods that burden the economy. The trend was upside down the last quarter, with a sharp declining import, resulting in a smaller trade deficit that added 4.99 points percentage to GDP. It was more than compensating for a drag of 3.17 points the percentage of the inventory.
Moderate consumer expenditure
Trade and inventory are the most unstable GDP components. Consumer expenditure, which contributes more than two-thirds of economic activities, increases at a speed of 1.4% after almost braking in the January-March quarter.
Private domestic purchases, which exclude trade, inventory, and government, are seen by economists and policy makers are the same as the underlying US economic growth barometer. This size grew at a level of 1.2% after forward at a level of 1.9% in the first quarter. That is an increase in domestic demand no later than the fourth quarter of 2022.
The dollar advanced versus a basket of currency. The results of treasury as rose.
Economists anticipate less enthusiastic economic growth in the second half. Although the White House has announced a number of trade agreements, economists said that the country’s effective tariff rate has remained one of the highest since the 1930s and noted that around 60% of the state imports were still revealed by the agreement.
Economist hopes that the Federal Reserve will maintain a benchmark interest rate in the range of 4.25% -4.50% after the end of the two -day policy meeting on Wednesday, against Trump’s pressure to reduce loan costs. The Fed cut the level three times in 2024, with the last step coming in December.
“Now that delinquency began to increase for consumers earning up, we hope that consumer expenditure in the future,” said Jeffrey Roach, Head of Economists at LPL Financial. “The Fed is likely to be in a good place to cut the tariff at their September meeting.”
Source: Reuters
