The U.S. economy may have hit 4 percent growth in the second quarter, the fastest since 2014 and a feat President Donald Trump will tout as a sign of his success. It’s more like a winning hand that doesn’t come up often.
Gross domestic product expanded at a 4.3 percent annualized rate in the April-June period, according to the Bloomberg survey median, with forecasts ranging as high as 5.4 percent. The stars were aligned following 2 percent growth in the first quarter: The biggest tax overhaul since the Reagan era delivered another boost to consumer spending and business investment, and the volatile categories of inventories and trade probably juiced the number -- helped by a likely temporary jump in soybean exports ahead of retaliatory tariffs.
While there’s much to like about the economy right now, analysts reckon the confluence of positive forces will give way to solid, albeit less spectacular, numbers in the second half and beyond as the tax stimulus begins to fade, the Federal Reserve raises borrowing costs further and the expansion ages. The burgeoning risk from tariff wars makes it even more unlikely that the torrid second-quarter performance is a new normal.
“It is just the luck of the draw,” said Gus Faucher, chief economist at PNC Financial Services Group Inc. in Pittsburgh. “In the second quarter, we had a lot of components adding to growth.” While “the economy is in good shape,” the projected surge is “temporary” and “the result of the fiscal stimulus,” he said. “It’s not a 4 percent economy.”
The GDP report, due from the Commerce Department on Friday in Washington, will also include comprehensive revisions to decades of data.
Beyond the headline number, the scorecard will probably be less of a barnburner.
Economists looking for a better sense of underlying demand typically exclude volatile components from the GDP calculations. One gauge that eliminates trade, inventories, and government outlays -- final sales to private domestic purchasers -- probably grew around or slightly above the average 2.8 percent pace for this expansion, rather than being a blowout.
Faucher forecasts a 3.2 percent gain for that measure of underlying demand with headline GDP growth of 4.1 percent. Gregory Daco of Oxford Economics sees final private domestic sales rising 2.7 percent, alongside a 4.5 percent GDP gain that “is unlikely to be repeated later this year.”
“I don’t think the longer-run picture has changed much,” PNC’s Faucher said. Post-stimulus, “we’re back in a 2 percent world.”
Overall GDP growth has averaged 2.2 percent since the recession ended in mid-2009. The second-quarter projections would bring the first-half pace to 3 percent, matching Trump’s long-run goal.