Growth decelerated in the second quarter, but not by as much as Wall Street thought, as tariffs and a global slowdown weighed on the U.S. economy, the Commerce Department reported Friday.
GDP increased 2.1%, down from the first quarter’s 3.1% and the weakest increase since Q1 of 2017 when President Donald Trump took office. Dow Jones Q2 estimates were for 2% growth.
However, the underlying numbers in the report seemed to take steam out of the recession fears that have been much of the talk among economists and policymakers at the Federal Reserve.
“The recession talk was always overstated,” said Michael Arone, chief investment strategist at State Street Global Advisors. “Those that were doing the Chicken Little, the sky is falling, we’re headed for recession talk were clearly early in that assessment. The economic data continue to suggest that the economy isn’t near recession, at least in the next year or so.”
Trump himself deemed the report “not bad” and noted that growth was continuing despite what he considers overly tight monetary policy from the Federal Reserve.
The president’s top economic adviser Larry Kudlow expressed similar sentiments in a CNBC interview.
“I think it’s almost a miracle that the economy is growing as rapidly as it is,” Kudlow said on “Squawk on the Street.” “This has not been easy with seven rate hikes.”
Consumer and government spending helped propel GDP in the April-to-June period, while a pullback in business investment weighed on the number. Personal consumption expenditures rose 4.3%, the best performance since the fourth quarter of 2017. Government consumption expenditures and gross investment rose 5%, the fastest pace since Q2 of 2009 as the economy was coming out of the Great Recession.
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