Along with a strong second quarter rebound for the US economy, some red flags
WASHINGTON — The U.S. economy expanded at a surprising 3% annual pace from April through June, bouncing back at least temporarily from a first-quarter drop that reflected disruptions from President Donald Trump’s trade wars.
Still, details of the report suggested that U.S. consumers and businesses are wary about the economic uncertainty arising from Trump’s radical campaign to restructure the American economy by slapping big taxes — tariffs — on imports from around the world.
“Headline numbers are hiding the economy’s true performance, which is slowing as tariffs take a bite out of activity,” Nationwide chief economist Kathy Bostjancic wrote.
America gross domestic product — the nation’s output of goods and services — rebounded after falling at a 0.5% clip from January through March, the Commerce Department reported Wednesday. The first-quarter drop, the first retreat of the U.S. economy in three years, was mainly caused by a surge in imports — which are subtracted from GDP — as businesses scrambled to bring in foreign goods ahead of Trump’s tariffs.
The bounceback was expected but its strength was a surprise: Economists had forecast 2% growth from April through June.
From April through June, a drop in imports — the biggest since the COVID-19 outbreak — added more than 5 percentage points to growth. Consumer spending registered lackluster growth of 1.4%, though it was an improvement over the first quarter’s 0.5%.
Private investment fell at a 15.6% annual pace, biggest drop since COVID-19 slammed the economy. A drop in inventories — as businesses worked down goods they’d stockpiled in the first quarter — shaved 3.2 percentage points off second-quarter growth.