This post was updated on July 27 at 7:54 a.m. CT.
The Commerce Department has released second-quarter gross domestic product numbers this morning, showing that the U.S. economy grew at an annual rate of 4.1 percent — the fastest pace since 2014. That figure was driven by exporters rushing to get products delivered ahead of retaliatory tariffs and an increase in consumer spending.
So why are consumers on such a spending spree these days?
We put that question to Austan Goolsbee, a former economic adviser to the Obama administration; Bob Murphy, an economics professor from Boston College; and Ken Simonson from the National Association of Business Economists.
Here’s what we learned:
- 1. It’s all about jobs. Unemployment in the U.S. is at record lows, and the job market has been strong for several years. When people have job security, they feel comfortable making both big and small purchases.
- 2. Prices aren’t rising dramatically. Yes, we’ve seen a lot of talk of a trade war. Companies are paying more for imported steel, aluminum, soybeans, pork and other products. But, for the most part, they haven’t passed that on to the consumer, at least not yet. If prices rise, it could put a chill on spending as consumers’ wallets are stretched. We could also see a temporary buying frenzy, as Americans scoop up items like cars and washing machines to avoid even higher prices later.
- 3. There’s slowly building momentum. Consumer spending has been climbing, slow and steady, for the past five years. Before the recession, consumer spending fluctuated a lot. One month it would rise, the next month it would dip. But during the economic recovery, consumer spending numbers leveled out and became very predictable. It’s become a reliable tortoise in the GDP race.
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