This just in from the White House: The economy grew at its fastest pace in a decade in the second quarter of the year, the Commerce Department said Wednesday. But there’s some good news in the report: A big part of the growth was the result of a bigger trade deficit—and it could lead to slower growth in the rest of the year.
The Commerce Department said the economy grew at a 4.1 percent annual rate in the April-June period. That was in part thanks to a hefty $112 billion trade deficit. The higher deficit will hurt consumers and businesses in the months ahead, economists say.
The good news for consumers was a surprise. Unemployment fell to 3.7 percent in July, the lowest in almost four decades. Businesses are hiring at a robust pace, notching an average of 213,000 new jobs a month over the past six months, according to monthly data from the Labor Department.
The trade deficit is important because it has been the only potential source of weakness in the economy over the past year. President Trump predicted a deficit-relieving surge in economic growth if he aggressively renegotiated trade deals with China, Europe and other trading partners.
But exports fell 5.6 percent in the second quarter and imports rose 8.7 percent. Economists say that was largely due to higher oil prices. The government publishes trade data on a lag, so the quarterly data was influenced by higher oil prices when it was calculating the growth. A full accounting of America’s trade balance will be published next month.