The U.S. economy expanded at a faster-than-expected clip in the second quarter as real gross domestic product (GDP) grew at an annual rate of 2.1% for the three-month period that ended June 30, according to the “advance” estimate released Friday (July 26) by the Bureau of Economic Analysis (BEA).
Although the ongoing expansion off the 3.1% growth in the first quarter of 2019, the updated economic reading still bested the cooler 1.2% estimates by a survey of top Wall Street economists and the 1.3% deceleration in the GDPNow forecast posted by Federal Reserve Bank of Atlanta on Thursday.
In response to the week-ending economic report, U.S. Department of Commerce Secretary Wilbur Ross boasted that ongoing expansion was the result of President Donald Trump’s business-friendly policies, although the second quarter growth rate is a full percentage point below the administration’s own yearly forecast of 3.1% and the 2018 annual growth of 2.9%.
“The Trump economy is growing strong and, on the heels of 3.1% growth in the first quarter, is poised to continue expanding,” Ross said in a statement. “President Trump’s ambitious agenda of deregulation, tax reform, and job creation is making the U.S. the premier place for business, and is restoring our position as an economic leader on the world stage.”
Entering the first quarter of 2019, the nation’s economy benefitted from an upturn in state and local government spending and a spike in private business investment and exports but saw a slowdown in housing purchases and U.S. goods sold abroad, BEA data shows.
ARKANSAS GDP NUMBERS
New BEA data shows that Arkansas supported GDP growth of 2.5% in the first quarter, the highest quarterly growth rate for Arkansas since the fourth quarter off 2016. That reading, also subject to revision, ranks Arkansas 38th among the 50 states, which ranged from a low of 1.2% in Hawaii to a high of 5.2% in West Virginia.
“While this represents solid growth, it fell short of the national growth rate of 3.1% in the first quarter,” said University of Arkansas economist. Michael Pakko. “Over the most recent four quarters, Arkansas GDP growth has grown 1.6%, compared to 3.2% nationwide.”
Pakko, director of UALR’s Economic Development Institute, said Arkansas’ growth rate was adversely affected by a sharp decline in agriculture, which subtracted 0.65% from the state’s overall economic growth in the midst of the Trump administrations ongoing trade war with China and efforts to ratify the U.S.-Mexico-Canada trade agreement.
Statewide, positive contributors to the Arkansas growth rate in the first quarter were the manufacturing sector, retail trade and health care. The next GDP update is scheduled for Nov. 7, at which time revised data from the first quarter of 2014 through the first quarter of 2019 will be released.
LONGEST U.S. EXPANSION
Friday’s “advanced” GDP reading is based on incomplete source data that is subject to revisions by the BEA, which is the economic research arm for the U.S. Department of Commerce. The “second” estimate for the second quarter, based on more complete data, will be released Aug. 29, 2019.
Still, the GDP report, which measures the value of the goods and services produced by the nation’s economy less the cost of the goods and services used up in production, adjusted for price changes, pushes the ongoing expansion into its 121st month following the Great Recession in 2009 – the longest expansion in U.S. history.
When President Trump took office in January 2017, he inherited 91 straight months of economic expansion from the previous administration led by former President Barack Obama. Through June, the U.S. economy grew without any significant decline in economic activity for 120 months, tying the 1991-2001 period with former President Bill Clinton sandwiched between former Presidents George H. Bush and his namesake son.
In a research report on July 18 by global analytics firm CoreLogic, chief economist Frank Nothaft said the nation’s strong job growth and rising employment rates over the past decade have had a positive impact on the housing economy, which has boosted wealth creation and GDP growth.
“During the last nine years, the expansion has created more than 20 million jobs, raised family incomes and rebuilt consumer confidence,” said Nothaft. “The longest stretch of mortgage rates below 5% in more than 60 years has supplemented these factors. These economic forces have driven a recovery in home sales, construction, prices and home equity wealth.”
STRONG CONSUMER SPENDING
According to the BEA, the increase in real GDP growth in the second quarter reflected continued upticks in consumer and government spending at the local, state and federal levels. However, the report showed a slowdown in business investment, exports and weaker spending in the resident and commercial housing sector, which reflects recent data showing weak home sales.
Ross also noted the quarter’s 4.3% annual uptick in consumer spending, which he called the “engine of the U.S. economy,” and said was the fastest rate of growth since the first quarter of 2006. The Commerce Secretary also highlighted the recent U.S. employment report released earlier this month, showing 224,000 new job adds in June, 129,000 in 2019, and 5 million since President Trump took office.
Overall, BEA data shows current-dollar GDP increased 4.6%, or $239.1 billion, in the second quarter to a level of $21.34 trillion. In the first quarter, current-dollar GDP rose by 3.9%, or $201.0 billion. Disposable personal income increased $193.4 billion, or 4.9%, in the second quarter, compared with an increase of $190.6 billion, or 4.8% in the previous quarter. Real disposable personal income, which is total income minus taxes, increased 2.5% in the second quarter, compared to 4.4% at the end of March.