Sugar rush propels US economic growth to four-year high

Container ship © Getty Images
A surge in trade boosted second-quarter US GDP

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, says
Gina Chon on Breakingviews.

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.