US economy grows even faster than first thought
The American economy expanded at a faster rate than previously thought in the second quarter, according to updated figures published today.
US GDP rose at an annual rate of 4.2 per cent in the second quarter, the Bureau of Economic Analysis (BEA) said, an upgrade from the first estimate of 4.1 per cent.
The US economy, the biggest in the world, has been buoyed by strong global growth as well as the effect of a big fiscal expansion pushed through by US President Donald Trump. Trump has cut taxes dramatically, while at the same time raising spending in some areas, in defiance of his Republican party's professed fiscal conservatism.
The US has outpaced the 2.5 per cent annual growth across the mainly advanced economies in the Organisation of Economic Co-operation and Development, with quarterly growth also well above the average across the G7 group of major economies.
The acceleration in GDP growth was driven by heightened consumer spending – with one measure of consumer confidence hitting a near 18-year high yesterday – as well as increased exports and government spending, the BEA said.
The rapid pace of growth has prompted some economists to warn that the US Federal Reserve may be forced to tighten monetary policy more rapidly to prevent the economy from over-heating, with stimulative fiscal policy stoking the fires.
The tax cuts in particular have boosted company profits, sending the S&P 500 index to fresh record highs last night, although private inventory investment and residential investment fell.
Exports also rose markedly, at an annual rate of 9.1 per cent, amid a concerted effort by the White House to lower the country's large trade deficit. However, economists and businesses from across the political spectrum have warned Trump against increased protectionist barriers, after a barrage of tariffs and threats, saying new tariffs could dent growth.