Sugar rush propels US economic growth to four-year high
Next summer the US economic expansion that began in 2009 will become the longest in the country’s history – provided a recession doesn’t strike in the meantime.
Next summer the US economic expansion that began in 2009 will become the longest in the country's history provided a recession doesn't strike in the meantime. The equity market is also marching towards new milestones. The average bull market in US market history has tended to last eight years, whereas the current one has endured for almost a decade.
A ten-year period of economic growth still pales in comparison to some other countries' recent performances, says Robin Wigglesworth in the Financial Times. Australia, for example, has gone 26 years without a recession. The UK and Canada enjoyed 16 years of expansion before the financial crisis.
In the US, GDP figures revealed that growth soared by an annualised 4.1% in the second quarter of 2018. This is almost double the 2.2% rate in the first quarter and the fastest pace since 2014. Chalk it up to a "sugar rush", says John Authers in the Financial Times the fiscal stimulus administered last year by "sweeping and unfunded tax cuts". What's more, this quarter many exports and deals with companies abroad appear to have been brought forward to avoid tariffs, says Authers. US businesses and farmers rushed to get their products shipped overseas, with net exports of goods and services making up 1.1% of second-quarter GDP growth, saysGina Chon on Breakingviews.
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Is the April-June period as good as it gets this year? Retaliatory tariffs from Canada, China, the EU and Mexico went into effect in June and July. A spiral of tariffs and retaliatory measures will inevitably hamper trade growth: after a jump in April and May, US exports dipped in June. China and Europe have lost momentum in the past few months too. The sugar rush could wear off very quickly.
Marina has a PhD in globalisation and the media from the London School of Economics, where she worked as a teaching assistant on the MSc Global Media. In 2014 she was invited to be a visiting scholar at Columbia University's sociology department in New York.
She has written for the Economists’ Intelligent Life magazine, the Financial Times, the Times Literary Supplement, and Standpoint magazine in the UK; the New York Observer in the US; and die Bild and Frankfurter Rundschau in Germany. She is trilingual and lives in London. She writes features and is the markets editor at MoneyWeek..
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