US economy rebounds in second quarter

The US economy is growing again, helped by trade swings and American consumers who keep spending. There are also signs of caution. The Commerce Department said that US gross domestic product rose at a decent rate.

The US economy expanded at a 3% annual pace from April through June. The bounce back 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.

Federal government spending and investment fell at a 3.7% annual rate on top of a 4.6% drop in the first quarter. Wednesday’s GDP report showed inflationary pressure easing in the second quarter.

The Federal Reserve’s favored inflation gauge – the personal consumption expenditures, or PCE, price index – rose at an annual rate of 2.1% in the second quarter, down from 3.7% in the first. Stripping out volatile food and energy prices, so-called core PCE inflation rose 2.5%, down from 3.5% in the first quarter.

On his Truth Social media platform, Trump heralded the GDP gain and stepped up his pressure on the Federal Reserve to cut interest rates: “2Q GDP JUST OUT: 3%, WAY BETTER THAN EXPECTED! “Too Late” MUST NOW LOWER THE RATE. No Inflation! Let people buy, and refinance, their homes!’’

This is not the first time that the economy during the Trump administration has outperformed expectations.