ARLINGTON, Va.—The U.S. economy grew 4.2% in the second quarter, according to the Commerce Department's final estimate – unchanged from the previous estimate.
This is the fastest pace of growth in nearly four years, noted NAFCU Chief Economist and Vice President of Research Curt Long in a NAFCU Macro Data Flash report.
"Looking ahead, economic growth is expected to remain strong for the rest of 2018. Consumer confidence hit an 18-year high in September, which bodes well for spending in the upcoming holiday shopping season," Long added. "However, uncertain trade policies pose a downside risk to growth. Hurricane Florence is also expected to restrain growth in the third quarter, but that will likely be offset by rebuilding efforts in the fourth quarter."
The Commerce Department data notes an upward revision to net exports ($-843.7 billion previous estimate; $-841 billion revised estimate) that was offset by a downward adjustment to inventory accumulation ($-26.9 billion previous estimate; $-36.8 billion revised estimate). Residential investment, business investment and government spending saw minor positive adjustments.
Drivers of Real GDP
Contributions to growth of real GDP came from gains in personal consumption expenditures (+2.57%), net exports (+1.22%), nonresidential investment (+1.15%) and government spending (+0.43%). Changes in private inventories reduced growth 1.17%, followed by residential investment (-0.05%), Long said.
Personal consumption expenditure (PCE) inflation, the Fed's preferred inflation metric, decreased from 2.5% in the first quarter to an upwardly revised 2% in the second quarter. Meanwhile, core PCE inflation (excluding food and energy) decreased from 2.2% to an upwardly revised 2.1%.
Real gross domestic income growth in the second quarter was revised downward from 1.8% to 1.6%. Nominal corporate profits rose by a downwardly revised 5.4% from the first quarter and were 2.6% higher than the same time last year, Long said.