US economy rebounds in second quarter despite tariff volatility
Gross domestic product (GDP), a measure of total goods and services produced, rose 3 per cent, when adjusted for seasonality and inflation, during the April-June period, the Commerce Department said in its advance second-quarter estimate on Wednesday.
A Reuters survey of economists had forecast GDP to increase at a 2.4 per cent annualised rate.
Last quarter's growth followed a 0.5 per cent contraction in the January-March period as business rushed to stockpile imports ahead of President Donald Trump's tariffs.
The Commerce Department attributed the second-quarter rebound to a decrease in imports and an increase in consumer spending. Those were partly offset by decreases in investment and exports.
Mr Trump's initial April 2 announcement – a blanket 10 per cent tariff on nearly all trading partners and harsher 'reciprocal' tariffs – shook financial markets before he reversed course a week later.
Most investors were largely fearful that the sweeping tariff announcement would spark an economic slowdown, and his stop-start approach towards the charges' implementation brought more uncertainty.
Markets have since come back in force as he delayed tariffs' implementation date and agreed to a temporary trade truce with China following escalatory tit-for-tat charges.
The S&P 500 recorded a six-day streak of record-highs before closing lower on Tuesday following stalled trade talks between the US and China in Sweden.
Wednesday's report is the latest in a series of macroeconomic data this week that was expected clarify the state of the US economy as it contends with high interest rates and the effects of tariffs.
The latest report also comes hours before the Federal Reserve was expected to announce it was holding interest rates steady yet again, with the UAE Central Bank mirroring its decision. The Fed has kept its target rate unchanged at 4.25 per cent and 4.50 per cent this year.
The Fed cut US interest rates in 2024, with the most recent in December, but has held pat this year owing to uncertainty surrounding tariffs.
Meanwhile, data released earlier this week pointed to signs of a labour market that is continuing to cool.
The US Bureau of Labour Statistics on Tuesday reported that job openings and hirings declined last month. The hiring rate also fell to 3.3 per cent while the quits rate remained unchanged at 2 per cent.
'Persistently low churn also leaves the labour market looking more fragile than headline numbers suggest,' Wells Fargo economists Sarah House and Nicole Cervi wrote to clients on Tuesday.
Also on Tuesday, the Conference Board reported that US consumers' outlook on the current level of job availability weakened for a seventh month in a row, reaching its lowest level since March 2021.
Separate data this week was expected to provide further clues on the economy, including the Fed's preferred inflation metric on Thursday and June's unemployment report on Friday.
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Arabian Post
an hour ago
- Arabian Post
Narendra Modi's Moment Of Truth Has Arrived After Eleven Years Of Rule
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Trump, known for his feisty ways, continuous changing stands and always exaggerating his role, has hurled maximum insult to India and to his dear friend Narendra Modi who did everything to please Trump during his first term as also in the second non-consecutive term beginning January 20 this year. Trump was adamant in insulting Modi after the Prime Minister without naming Trump declared in Lok Sabha during Operation Sindoor debate on Tuesday that no foreign leader played any role in the ceasefire between India and Pakistan decided by the two countries on May 10. The next day, Trump again repeated that He took the main role in precipitating ceasefire between India and Pakistan. This was the 30th time, he repeated the same thing. Before Trump, other US leaders also worked from behind in organizing the end of hostilities between the two countries. For instance, the then President Clinton made serious efforts in ending the Kargil war in 1999, but he never claimed any credit for this. Trump is different, He thinks that nothing in global diplomacy moves without him. The decision on India regarding the high tariff was a result of his personal ego also vis a vis Narendra Modi. The US President was looking for total surrender in trade talks, but Narendra Modi could not afford that on the agricultural products sector, especially milk and dairy. Here Modi's state interests are highly involved. The dairy and milk industry is the key to the growth of Gujarat and lakhs of farmers form the supporting base of BJP. Prime Minister as a BJP leader could not afford to compromise the economic interest of his party's supporting base.. The trade talks are still dragging on. Now after this 25 per cent tariff hike on Indian exports, if Indian officials at the instance of the PM change their stand agreeing to the diktat of the US, there might be a deal facilitating the process of lowering the tariff rate from 25 per cent. Further, Trump's threat to impose penalty as high as 100 per cent on India for imports from Russia poses a real threat to the balance of payment state of the country since in the last two years, the cheap crude imports from Russia saved a huge amount of foreign exchange helping the government to tame inflation. Now, it is to be seen whether the Prime Minister musters enough courage to continue with the cheap Russian crude oil imports or starts the process of diversifying the imports though the price will be higher and more foreign exchange will be required. In this Russian oil context, Trump has used the undiplomatic language by saying that let both the dead Russian and Indian economies go down. This comes from a sort of hate syndrome because this is untrue. India is not a dead economy. The economy is growing but there are problems of distributive justice and unemployment. Some of the policies are flawed needing course correction, but in global context, India stands out. Rahul Gandhi through his support to Trump on this dead economy issue has only brought disrepute to the Congress Party. Somebody senior with knowledge of economics must properly guide the Leader of the Opposition. Otherwise, he will not only create problems for the Congress but also harm the cause of INDIA bloc. Narendra Modi is certainly on a backfoot but if he is compelled by circumstances to defy Trump and fight him, the opposition should support him. Narendra Modi is not India, so supporting Indian cause does not mean strengthening Modi What is most discomforting for India is that India the Prime Minister of which country is considered as the closest among the heads of South Asian nations to the US President, has been charged the maximum tariff rate of 25 per cent. As against India, Pakistan has been charged 19 per cent, Sri Lanka 20 per cent, Bangladesh 20 per cent and Afghanistan 15 per cent. 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Al Etihad
9 hours ago
- Al Etihad
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Wall Street also opened sharply lower on broadest index of Asia-Pacific shares outside Japan fell 1.5%, bringing the total loss this week to roughly 2.7%. In commodity markets, oil prices continued to fall after a 1% plunge on new tariffs have created yet more uncertainty, with many details unclear. 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Zawya
9 hours ago
- Zawya
Apple's tariff-fueled iPhone sales surge raises doubts about sustainability
Apple's best revenue growth in three years failed to impress, with shares down about 1% in volatile trading on Friday, as investors questioned whether a tariff-driven surge in iPhone sales would last. A rush to buy iPhones ahead of potential U.S. tariff-driven price increases, along with China subsidies and upbeat demand for the budget 16e model launched in February, fueled a 13.5% jump in the quarterly sales of the device, crushing expectations. That pushed up total revenue by a better-than-expected 10% in the April-June period, and Apple issued an above-estimate sales forecast for the current quarter ending in September. The results came at a precarious time for the company long seen as Big Tech's safest bet. Beyond the tariff threats facing its manufacturing hubs China and India, Apple has been slow to move on artificial intelligence technology that its software and devices rivals have embraced as their next big growth driver. Analysts said the sales rebound in China, where local rivals have moved faster than Apple on AI features, was a positive. The company benefited in the world's largest smartphone market from a state subsidy program meant to prop up device sales. But they also warned the "pull-in" boost was expected to be temporary, raising doubts about demand for the rest of the year. "Pull-forward, remember, is not a U.S. issue. It's also a China issue. There, Apple's Pro model iPhones were too expensive to qualify for Chinese government subsidies that were being offered … so they cut prices to qualify, leaning into the volume opportunity. It worked," MoffettNathanson analysts said. "But as with the U.S., what does that mean for the rest of the year?" So far this year, Apple stock has underperformed all its "Magnificent Seven" peers barring Tesla, with a decline of more than 17%. The S&P has risen 7.8% in the period. Many of Apple's products are currently exempt from tariffs, and the company has also been rebalancing its supply chain to shield itself from the duties, sourcing iPhones from India and other products such as Macs and Apple Watches from Vietnam. The U.S. is currently negotiating trade deals with both China and India, with U.S. President Donald Trump saying India could face 25% tariffs as early as Friday. Apple said tariffs would raise costs by $1.1 billion in the current quarter after the company said it took an $800 million hit from tariffs in the third quarter. Its AI strategy also remains a concern after Apple delayed the release of an AI-enhanced version of Siri virtual assistant and was slow to launch Apple Intelligence. CEO Tim Cook said on Thursday the company was making good progress on Siri and that Apple is "significantly growing" its investments in AI. "Brand loyalty gives Apple time to get the AI transition right, but it needs to start delivering," said Matt Britzman, senior equity analyst, Hargreaves Lansdown.
