U.S. economic growth rebounded more than expected in the second quarter, but that grossly overstated the economy’s health as subsiding imports accounted for the bulk of the improvement and consumer spending increased moderately.
Gross domestic product increased at a 3.0% annualized rate last quarter, the Commerce Department’s Bureau of Economic Analysis said in its advance estimate of second-quarter GDP on Wednesday. The economy contracted at a 0.5% pace in the January-March quarter, the first GDP decline in three years.
The main GDP figure was heavily distorted by trade as was the case in the first quarter. Economists say President Donald Trump’s protectionist trade policy, including sweeping tariffs on imports as well as delaying higher duties, has made it difficult to get a clear pulse on the economy.
Economists urged focusing on final sales to private domestic purchasers, viewed by economists and policymakers alike as a barometer of underlying U.S. economic growth.
A rush to beat the duties boosted imports in the first quarter, resulting in a record goods trade deficit that weighed on the economy. That trend reversed last quarter. Imports are a subtraction in the calculation of GDP.
A Reuters survey of economists had forecast GDP rebounding at a 2.4% annualized rate. The survey was, however, concluded before data on Tuesday showed the goods trade deficit shrinking to its smallest in nearly two years in June and inventories rising marginally.