Trump hails growth as one-offs and consumers boost economy

30 July, 2018, 23:05 | Author: Clarence Schmidt
  • Trump Breaks Tradition on GDP Figures

According to Mr. Trump, the United States is the economic envy of the world.

Gross domestic product increased at a 4.1 per cent annualised rate also as government spending picked up, the Commerce Department said in its snapshot of second-quarter GDP on Friday.

President Trump took credit in a proverbial victory lap on the White House's South Lawn, telling reporters that the high numbers are "sustainable".

Zandi forecast that growth for 2018 will reach 3 percent, which would be the best rate since before the Great Recession.

Strong GDP growth reflected both real momentum in the underlying economy and stimulus policies that will be temporary-and perhaps damaging down the road.

Trump also seemed to back down on his trade threats this week, after a meeting with European Commission President Jean-Claude Juncker.

Trump said, "These numbers are very sustainable". "This isn't a one-time shot".

Besides Trump's hint, there were other reasons the economy was expected to accelerate in the second quarter from the upwardly revised 2.2% pace of growth recorded in Q1. Even Senegal has better economic growth figures than the United States.

For now, strong growth in the second quarter will keep the Federal Reserve on course to raise interest rates two more times this year.

Inventories subtracted about a percent from growth, and some economists were quick to point out growth would have topped 5 percent if inventories were not so soft.

Exports are a particularly dramatic example.

His remarks followed events Thursday in Iowa and IL, where Trump falsely repeated a claim that the USA economy is the best "we've ever had" and incorrectly asserted that Canada's trade market is "totally closed". But in recent months, the trade dispute sparked an unexpected short-term boost in exports. Most significantly, China appears to have accelerated purchases of soybeans, crude oil, and other exports before new tariffs went into effect. The Commerce Department said earlier this month that soybean exports surged as buyers stockpiled ahead of China's imposition of 25% tariffs.

Ian Shepherdson, an economist at Pantheon Macroeconomics, said following Friday's report, "In one line: Looks great; won't last". And, he says, that will be a drag on the economy. "I wouldn't want to overstate the underlying strength in GDP growth based on Friday's numbers", says Omair Sharif. "We are now on track to hit an average GDP annual growth of over 3 per cent and it could be substantially over 3 per cent", said the President.

Amid concerns that a first quarter rise in USA auto sales and increased foreign purchases of U.S. exports may represent strategic buying before Trump-prompted sanctions bite, the salesman-in-chief insisted there were no clouds on the economic horizon.

Another factor at play here is tax cuts.

He says that if the government had passed a big infrastructure plan, it would have meant long-term projects that would have helped boost growth and underlying productivity for years to come. But housing, which has struggled this year, shrank at a 1.1 percent rate after an even bigger 3.4 percent decline in the first quarter.



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