The 2Q2018 GDP grew at a faster 4.1% q/q, the best pace since 3Q2014’s 4.9%. This brings the 1H2018 GDP to 2.8% y/y. Strong consumer and business spending, added with strong exports ahead of retaliatory tariffs from China helped drive GDP. Personal consumption expenditures rose 4% y/y while business investment expanded 5.8% y/y and federal government outlays increased by 2.7% y/y. Meanwhile, exports climbed 5.1%y/y.

Our next question is whether the growth will remain sustainable. Under the previous US president, we found several spikes in the GDP. We believe the overall GDP is projected to grow around 2.8% for the full year of 2018, with the upside around 3.0%. Hence, we reiterate our view of two more rate hikes by the US Federal Reserve in 2H2018 — one in September and the other in December, each by 25 bps. We project the policy rate will normalize around 2.75%–3.00% with room for it to reach 3.25%–3.50% by end-2019.

• The 2Q2018 GDP grew at a faster pace of 4.1% q/q from 2.2% q/q in 1Q2018. The reading turned out to be the best pace since 3Q2014 of 4.9%. This brings the 1H2018 GDP to 2.8% y/y.

• Strong consumer and business spending, added with strong exports ahead of retaliatory tariffs from China helped drive GDP. Personal consumption expenditures rose 4% y/y while business investment expanded 5.8% y/y and federal government outlays increased by 2.7%y/y. Meanwhile, exports climbed 5.1%y/y.

• Under the previous US president, we found several spikes in the GDP. We believe the overall GDP is projected to grow around 2.8% for the full year of 2018, with the upside around 3.0%. Hence, we reiterate our view of two more rate hikes by the US Federal Reserve in 2H2018 — one in September and the other in December, each by 25 bps. We project the policy rate will normalize around 2.75%–3.00% with room for it to reach 3.25%–3.50% by end-2019.

Source: AmInvest Research - 30 Jul 2018