Final reading on Q2 GDP confirms 4.2% gain, the fastest rise in nearly four years

  • GDP grew at a 4.2 percent pace in the second quarter, in line with estimates.
  • The performance was the best since the third quarter of 2014 and was boosted by spending and investment increases.
  • Economists think the current quarter will show a slowdown due to trade.

The U.S. economy grew as expected in the second quarter, according to a reading Thursday that confirmed that gross domestic product rose at its quickest rate in nearly four years.

GDP, the broadest measure of how the economy is progressing, increased 4.2 percent, the Commerce Department's Bureau of Economic Analysis reported, the same as expected from economists surveyed by Thomson Reuters. It was the fastest pace since the third quarter of 2014.

This was the final reading for the quarter and now sets the stage for Q3 and what is expected to be a year that will show growth better than 3 percent, which the Trump administration has set as its goal.

GDP increased at a 2.2 percent pace in the first quarter. The Atlanta Fed is forecasting a 4.4 percent acceleration in the third quarter, though CNBC's Rapid Update survey of economists sees a less robust but still strong reading of 3.3 percent.

Economists see growth slowing in the current quarter due to a drag from trade brought about by the tariff battles between the U.S. and China. The drag could be a full percentage point after trade added 1.2 percentage points in the second quarter due to a rush in soybean purchases ahead of the tariffs.

An indicator of what's ahead in the third quarter came at the same time Thursday, with U.S. durable goods orders in August jumping 4.5 percent against expectations of just 2 percent. Durables rose 8.6 percent in the second quarter after a 2 percent decline in the earlier three-month period. However, most of the jump came in aircraft orders. Underlying orders were not nearly as robust.

The GDP reading comes as the economy seems to be firing on nearly all cylinders, with a sluggish housing sector being the lone exception. Consumer confidence recently hit an 18-year high, small business optimism is also around record highs and corporate profit increases have been running at 25 percent this year.

Citing a stronger economy, the Federal Reserve on Wednesday approved another quarter-point hike in its benchmark interest rate.

Second-quarter growth was fueled by higher spending in both the public and private sectors as well as business investment. Imports fell while exports were higher. The gains were partially offset by a decline in private inventory investment.

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