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Fred Dunkley

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Fred Dunkley is a tech analyst, writer, and seasoned investor. Fred has years of experience covering global markets and geopolitics. 

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U.S. Economic Growth Surges In Second Quarter

USA

Trump was forecasting a 5-percent increase in GDP for today’s economic report ahead of the fact, with actual numbers coming in at 4.1 percent increase for the second quarter, according to the Department of Commerce, up from a first-quarter increase of 2.2 percent.

Even if they didn’t match Trump’s projection, 4.1-percent GDP growth represents the largest gain since the third quarter of 2014 thanks to Americans who are spending more as exports rise sharply and business investment soars.

But it’s also slightly lower than economists had been predicting, on average. Most were settled on a GDP increase of 4.2-4.4 percent.

“We’ve accomplished an economic turnaround of historic proportions,” Trump declared.

The Department of Commerce seemed to agree.

“Today’s release of the United States’ GDP growth of 4.1% for the second quarter shows that President Trump’s economic plan is working. President Trump is keeping his pledge to restore our economy. His vision is revitalizing communities across the country and letting American families keep more of their hard-earned dollars,” U.S. Secretary of Commerce Wilbur Ross said in a statement.

In addition to the 4.1-percent growth, the first quarter’s growth was revised up in today’s announcement to 2.2 percent from 2 percent, the Department of Commerce noted.

(Click to enlarge)

According to the Department of Commerce, the acceleration in real GDP growth in Q2 “reflected accelerations in PCE [personal consumer expenditures] and in exports, a smaller decrease in residential fixed investment, and accelerations in federal government spending and in state and local spending”. Related: Is A Global Economic Crash Looming?

Exports grew at a 9.3-percent annual rate, up from the lackluster 3.6-percent growth of the first quarter.

Current-dollar GDP increased 7.4 percent ($361.5 billion) in the second quarter to a level of $20.4 trillion, compared to an increase of 4.3 percent or $209.2 billion in Q1.

While impressive, there may be a fair amount of smoke and mirrors here, according to some.

U.S. businesses had been ramping up exports in the quarter in fear of Trump’s tariffs: The trick was to get as much in as they could before tariffs rain on the parade.

With tariffs going into effect, the next quarter might not look anything like the most recent one. Tariffs, after all, are typically not an engine of growth.

Growth for the entire year isn’t expected to reflect these Q2 numbers. Growth this year is on track to be just above 2.9 percent, similar to the growth of 2015.

Overall investment actually fell compared to the first quarter, according to Quartz, with “feeble” growth in equipment investment “suggesting that tax cuts haven’t yet brought forth a US manufacturing revival”. The magazine also noted that residential investment had fallen by 1.1 percent, continuing the housing spending decline.

Trump disagrees, saying the “numbers are very, very sustainable”, and “this isn’t a one-time shot”.

“I happen to think we’re going to do extraordinarily well in our next report,” he said.

Even more bombastically, Trump noted: “We’ve accomplished an economic turnaround of historic proportions. Once again we are the economic envy of the entire world.”

By Fred Dunkley for Safehaven.com

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