American Economy Surges 3 Percent in Q2, Higher Than Predicted, Despite Uncertainty Over Trump Tariffs
The stronger-than-expected economy may make Federal Reserve governors rethink any plans they may have to lower interest rates in the near future.
The American economy expanded at a surprisingly brisk rate in the second quarter, powered by a major shift in trade dynamics and robust consumer spending, the Department of Commerce says.
Gross domestic product, which measures the total value of goods and services produced across the economy, rose 3 percent between April and June. The increase, adjusted for both inflation and seasonality, surpassed the estimated 2.3 percent growth predicted by Dow Jones economists and marked a sharp recovery from the first quarterâs 0.5 percent decline.
Net exports added 5 percentage points to the GDP, the Bureau of Economic Analysis report showed Wednesday.
President Trump was quick to crow about the news. â2Q GDP JUST OUT: 3%, WAY BETTER THAN EXPECTED!â he wrote on Truth Social. Addressing the Federal Reserve chairman, Jerome Powell, Mr. Trump added, ââToo Lateâ MUST NOW LOWER THE RATE. No Inflation! Let people buy, and refinance, their homes!â
The second-quarter performance was bolstered by a reversal in trade flows. While imports fell 30.3 percent, a dramatic turnaround from their 37.9 percent surge in Q1, exports faced only a slight decline of 1.8 percent. The Q1 surge in imports was attributed to businesses racing to secure goods ahead of tariff announcements by Mr. Trump in early April.
Mr. Trump declared April 2 as âLiberation Dayâ and spent the following months in tense negotiations with global trading partners. Those negotiations ultimately resulted in elevated import taxes for American consumers compared to the start of the year, though they were not as severe as initially proposed.
The latest economic report also showed signs of cooling inflation. The personal consumption expenditures price index, the Federal Reserveâs preferred inflation gauge, increased by 2.1 percent in Q2, just above the central bankâs 2 percent target but significantly lower than the first quarterâs 3.8 percent. Core PCE inflation, which excludes food and energy, rose 2.5 percent, down from Q1âs 3.5 percent.
The Federal Reserve board of governors, which concludes its monthly meeting later on Wednesday, is expected to maintain its overnight borrowing rate within a range of 4.25 percent to 4.5 percent, unchanged since December, despite Mr. Trumpâs pressure on Mr. Powell.
