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The U.S. economy grew 4.2 percent at an annual rate in the second quarter of 2018, the best quarter in almost four years. On a year-over-year basis real GDP growth was 2.9 percent in the second quarter, the best pace since the first half of 2015.
However, much of the increase in exports came as China imported soybeans ahead of increased tariffs, with exports set to decline in the third quarter.
The U.S. economy added 157,000 jobs in July; the private sector added 170,000 jobs over the month, with government employment down by 13,000. There was a large upward revision to job growth in the prior two months of a combined 59,000.
In an August speech at the annual Jackson Hole monetary policy conference, Federal Reserve Chair Powell argued that the central bank’s current monetary policy is appropriate. Powell pointed out the risks of moving too aggressively in tightening monetary policy—causing a recession, and too slowly—causing the economy to overheat. Powell said that current “inflation may no longer be the first or best indicator of a tight labor market and rising pressures on resource utilization.”
Instead, he mentioned “destabilizing excesses” in financial markets may now be the best signal that the economy is overheating, citing in particular the past two recessions. Powell then said that “risk management suggests looking beyond inflation for signs of excesses.” Powell’s speech supports further gradual increases in the federal funds rate, consistent with PNC’s forecast.
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