US GDP expanded 3% in April-June

The U.S. economy grew again in the second quarter, government data showed yesterday, July 30, but analysts pointed to distortions due to fluctuations in trade flows caused by President Donald Trump's tariffs.

The world's largest economy expanded at an annualized rate of 3.0% in April through June, exceeding economists' expectations and reversing a 0.5% decline in the first three months of the year, the Commerce Department reported.

A Briefing.com consensus forecast called for a gross domestic product (GDP) growth rate of 2.5 percent.

An underlying measure of GDP “slowed to a weak 1.2% from 1.9% in the first quarter,” painting a more accurate picture of economic activity, he added.

Real consumer and business spending increased only moderately, after households brought forward their purchases, he said. Businesses, for their part, slowed spending due to increased political uncertainty.

At the beginning of the year, companies rushed to stock up on products to avoid the worst of Trump's threat of higher tariffs, but the stockpile has been dissipating.

"The expansion in real GDP in the second quarter primarily reflected a decline in imports, which are a subtraction in the calculation of GDP," the Commerce Department noted.

The increase also reflected a rise in consumer spending, the report said.

The surge in imports in the first quarter was the largest drag on GDP growth from net exports ever recorded, Goldman Sachs analysts recently noted.

Analysts expect a rebound as imports cool, but note that it may not be sustainable.

Economists have also warned that Trump's tariff increases could trigger a spike in inflation, which in turn could erode household purchasing power and influence consumption patterns.

Shifting to a lower gear

“Underneath the numbers, the economy is shifting into a lower gear, but not in reverse,” said Bernard Yaros, chief U.S. economist at Oxford Economics.

The economy's resilience will allow the Fed to "wait and see the impact of tariffs on consumer prices before considering an interest rate cut in December," he added.

For now, he said, "consumers are slowing their spending, but they're not heading straight for the bunkers."

Analysts are monitoring the impact of Trump's tariffs on inflation, and economists expect more data to become available in the summer months.