July 2018 Economic Recap
The initial estimate for second quarter GDP growth came in at an annualized 4.1%, up 2.2% from the first quarter’s third estimate of 1.9%. The rise was attributed in part to a rebound in consumer spending, up 4% from the previous quarter, and a 7.3% increase in nonresidential investment, both likely bolstered by the recent tax cuts. While residential investment and inventory growth represented a drag, net exports contributed an additional 1.06% to growth, decreasing the trade deficit by $50 billion over the quarter. Government spending, up 3.5%, also contributed positively to the result adding more than a third of a percent to growth. Though undeniably a positive result, economists expect it to be short-lived as approximately 50% of the export boost can be attributed to excess Chinese demand prior to retaliatory import tariffs taking effect.
The much-anticipated meeting between President Trump and European Commission President Claude Juncker resulted in a respite in the trade conflict between the US and the European Union. Tensions were running high following President Trump’s threat to impose a 25% tariff on car imports from the EU which would have had material consequences in both the economic and likely the diplomatic relationship between the two economic powerhouses. The negotiated truce included an agreement to work toward an environment of zero tariffs, barriers or subsidies on all non-auto industrial goods starting right away, while no further tariffs would be imposed during the length of the negotiations. Markets jumped at the announcement.
For a deeper consideration of the economic data released during July, please follow the links below: