Did economy break out in second quarter?

Analysts say yes, to the tune of 4% growth.

After lackluster economic growth early this year, the government is expected to report this week that the nation’s gross domestic product increased at the fastest pace in three years in the second quarter.

The news isn’t expected to be nearly as upbeat for home sales, which have been hampered by low supplies and rising costs. But business investment likely surged despite jitters over widening U.S. trade battles.

Despite steady job and income growth, existing home sales have been curtailed by rising mortgage rates and skimpy supplies that have pushed up prices. Sales dipped in both April and May. And pending sales, which track accepted offers but not signed contracts, were weak in those two months as well, suggesting sales last month may been tepid as well, Nomura economist Lewis Alexander says. Economists expect the National Association of Realtors to report Monday that existing home sales rose a modest 0.9 percent in June to a seasonally adjusted annual rate of 5.48 million.

New home sales have faced supply constraints as well – there aren’t enough construction workers and available lots to satisfy demand. After sales climbed 6.7 percent in May, economists expect the Commerce Depart- ment on Tuesday to announce a 2.8 percent decline for June to a seasonally adjusted annual rate of 670,000.

On Thursday, Commerce releases its estimate of orders for long-lasting goods such as computers and factory equipment. Most closely watched is a measure that excludes aircraft and defense-related items and serves as a proxy for business investment. After that reading dipped 0.2 percent in May, economists estimate Commerce to report a healthy 0.7 percent increase in June.

Consumers hunkered down early in the year after a holiday spending binge drained their pocketbooks and 2017 tax refunds were delayed. But by the second quarter, those tax refunds had arrived and federal tax cuts for this year were leaving more money in their paychecks. As a result, consumer spending likely fueled strong economic growth in the April-June period.

Also, business investment likely grew briskly and federal government outlays advanced on higher defense spending, Alexander says. There was also a surge in soybean exports as overseas businesses loaded up on supplies before their countries’ retaliatory tariffs against the U.S. kicked in. That likely means lower sales in the months ahead.

But all told, economists estimate Commerce will announce Friday that the economy grew at a 4 percent annual rate in the second quarter. That would be the fastest pace since the third quarter of 2014.