The U.S. economy’s 4.1 percent growth rate in the second quarter hit economist expectations on the head–but the underlying data suggest the economy may be even stronger than the headline.
Economists often look to a figure known as “final sales to private domestic purchasers” for a view of how the private sector is doing. That number strips out volatile inventories data, trade, and government spending. It rose 4.3 percent in the second quarter, up from 2 percent in the first quarter.
Jason Furman, who served at head of the Obama administration’s Council of Economic Advisers, pointed out the underlying strength in a tweet Friday morning.
Big surprise: the underlying data for Q2 is even better than the headline 4.1% annual GDP growth rate.
Volatile NX added 1.1 but volatile inventories SUBTRACTED 1.0. All in consumption plus fixed investment up 4.3%.
— Jason Furman (@jasonfurman) July 27, 2018
The first quarter GDP number was revised up to 2.2 percent, from 2.0 in the earlier estimate. Combined with the second quarter, the economy has been growing at a 3.15 percent pace for the first six months. Many economists think that may be sustainable for the remainder of the year.
Consumer spending rose sharply in the second quarter, after slumping in the first. This likely reflects rising consumer confidence in a very-low unemployment environment as well as the effects of the tax cuts, which left consumers with more money to spend.