Consumer spending ticked up slightly after a near halt in the first quarter, but private sector investments plunged in the second quarter.<\/p>\n
Economic growth in the United States has bounced back more than expected in the second quarter, but the data grossly overstates the economy\u2019s health as declining imports accounted for the bulk of the improvement and domestic demand rose at its slowest pace in two and a half years.<\/p>\n
The US economy grew by 3 percent at an annualised pace in the second quarter, according to Commerce Department released data on Wednesday, beating economists\u2019 expectations after a contraction of 0.5 percent in the first quarter of the year.<\/p>\n
Growth in consumer spending ticked up moderately by 1.4 percent across both goods and services, after almost braking in the first quarter as US President Donald Trump\u2019s tariffs created uncertainty.<\/p>\n
Imports dropped sharply \u2013 after the rush to stockpile in the first quarter in an effort to beat tariffs \u2013 which added 5 percent to growth.<\/p>\n
The White House touted the report, with press secretary Karoline Leavitt saying in a statement that \u201cPresident Trump has reduced America\u2019s reliance on foreign products, boosted investment in the US, and created thousands of jobs \u2014 delivering on his promise to Make America Wealthy Again. The data is clear, and there are no more excuses \u2014 now is the time for \u2018too late\u2019 Powell to cut the rates!\u201d<\/p>\n
Jerome Powell, chair of the US Federal Reserve, has been under pressure from Trump for months cut interest rates but has repeatedly said the Fed will wait to see how the economy evolves under the tariff pressures before deciding if it will reduce its key interest rate.<\/p>\n
\u2018Policy-initiated slowdown\u2019<\/p>\n
Despite claims that there is boosted investment in the US, the data says otherwise as private sector investment plunged 15.6 percent in the second quarter.<\/p>\n
\u201cToday\u2019s GDP release only further confirms that we\u2019re in the midst of a policy-initiated slowdown. The top-line number looks superficially better but only because of some snapback from the tariff-driven quirks to trade and inventories that temporarily weighed on output in Q1,\u201d Skanda Amarnath, executive director of Employ America and former Federal Reserve economist, said in a statement provided to Al Jazeera.<\/p>\n
This comes alongside a drop in inventories of 3.2 percent and a slowdown in non-durable goods manufacturing, which grew at a pace of 1.3 percent, down from 2.3 percent in the previous quarter.<\/p>\n
\u201cThis second quarter estimate reflects this administration\u2019s chaotic trade environment with a decrease in imports through a decrease in nondurable goods. In addition, there has also been a decrease in exports, led by cars, engines, and parts, a reflection of existing tariffs on steel, aluminum, and automobiles,\u201d Gbenga Ajilore, chief economist at the Center on Budget and Policy Priorities, said in a statement provided to Al Jazeera.<\/p>\n
Contrary to the White House\u2019s claims, job growth also slowed. Last month\u2019s US Labor Department jobs report showed limited traction in sectors impacted by tariffs, including wholesale trade. The Labor Department\u2019s July report<\/a> is slated to be released on Friday. The ADP private sector payroll report released on Wednesday showed 104,000 jobs added last month and revised figures from the previous month to a decline of 23,000 jobs.<\/p>\n The gross domestic product (GDP) report showed that final sales to private domestic purchasers \u2014 otherwise known as business and consumers \u2014 showed an expansion of 1.2 percent for the quarter, marking a slowdown from the 1.9 percent in the first quarter of the year.<\/p>\n \u201cThis morning\u2019s report makes clear that tariffs and uncertainty were slowing the economy even in the first half of the year,\u201d Daniel Hornung, senior fellow at MIT and former deputy director of the National Economic Council, said in a statement provided to Al Jazeera.<\/p>\n