US economy experienced 4.1% increase in GDP in second quarter of 2018. Since 2014, this growth rate is the strongest ones. US average GDP is 3.22% from 1947 to 2018. The highest GDP was recorded back in first quarter of 1950 of 16.70% and the lowest was recorded in first quarter of 1958 of -10%. According to BEA (The Bureau of Economic Analysis), second quarter’s GDP is double as of first quarter’s GDP. In first quarter it was 2.2%.
Donald Trump had promised to increase US GDP to 4% with the help of major tax cuts and infrastructure investment. He remained successful with his aim in second quarter of 2018. GDP goal of Trump’s official administration is to sustain US GDP of 3% and they are working for it. They managed to increase private domestic final sales excluding inventories, trade and government outlays.
There are mainly four components of calculating GDP of any country. It includes Household Spending, Business Investment, Government Spending and Net Exports. According to statistics agency, this increase is due to positive contributions by business investments, net exports and household spending.
Household spending is the major component to increase GDP which has capability to boost up the economy to the maximum. In US case, it exceeded 3% and contributed 2.69% in GDP growth. Population spent more on purchasing new auto mobiles, healthcare, utilities, housing, accommodations and food services. Another factor is lower taxes which ultimately benefited consumer purchasing power from hiring more staff. There is low unemployment rate in US in 2018 as compared to 1969 which positively affected US finances, borrowing costs and inflation points.
Second major component to increase GDP is Business investment. Nonresidential business investment in US increased and contributed 1% point to increase GDPA. It includes investment by equipment, intellectual property products and structures.
A third factor is Net exports. The exports increased 9.3% but imports remained 0.5%, due to which, net export contributed 1.06% to increase US GDP.
An increase to 4.1% GDP is a huge success within itself but some analyst think that trade war may affect this rate and it may fall back later in 2018.