ARLINGTON, Va.—The U.S. economy grew an upwardly revised 4.2% in the second quarter – the fastest growth pace in nearly four years, according to the Commerce Department's second estimate released this week.
The revision (from the initial estimate of 4.1%) came mainly from a stronger reading of intellectual property investment and a lower estimate for imports.
"Looking ahead, economic growth is expected to remain strong for the rest of 2018," said NAFCU Chief Economist and Vice President of Research Curt Long in a NAFCU Macro Data Flash report. "The pace of expansion, however, will likely decelerate as the effects of tax cuts fade and as the Fed raises rates further."
The Fed is expected to increase rates following its Federal Open Market Committee meeting next month, Sept. 25-26.
"Uncertain trade policies also pose a downside risk to growth," Long added. "Recent reports suggest that trade deficits surged in July as retaliatory tariffs dragged down the exports of agricultural products."
Contributions to growth of real GDP came from gains in personal consumption expenditures (+2.55%), net exports (+1.17%), nonresidential investment (+1.13%age points) and government spending (+0.41%). Inventory investment reduced growth 0.97%, followed by residential investment (-0.06%).
Personal consumption expenditure (PCE) inflation, the Fed's preferred inflation metric, decreased from 2.5% in the first quarter to an upwardly revised 1.9% in the second quarter. Core PCE inflation (excluding food and energy) decreased from 2.2% in the first quarter to 2% in the second quarter, Long said.
Real gross domestic income increased 1.8% in the second quarter compared to an increase of 3.9% in the first quarter. Nominal corporate profits increased 6.3% from the first quarter and were 3.5% higher than the same time last year, Long added.