GDP report proves Trump is turning the economy around

30 July, 2018, 23:02 | Author: Charlene Valdez
  • Trump Breaks Tradition on GDP Figures

The highly-anticipated Commerce Department report was released this morning, and it did not disappoint: it shows a us economy that grew by 4.1 percent in the second quarter of this year.

"I will say this right now and I will say it strongly, as the trade deals come in one by one, we are going to go a lot higher than these numbers and these are great numbers", he said.

Boosted by a 4-percent jump in consumer spending and a 13.3 percent surge in goods exports in the second quarter, the economy expanded at its fastest pace since the 4.9-percent rate of the third quarter of 2014.

The economy's solid performance last quarter gave Trump a chance to bask in his policy victories, including the biggest tax overhaul since the Reagan era.

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Rabobank International Ltd. predicted in June that the US may overtake Brazil as the biggest soybean exporter to the EU. He has slapped taxes on imported steel and aluminum, saying they pose a threat to USA national security.

Most independent economists say this quarter's growth was juiced by stimulus from the trillion-dollar tax cut and a one-time rush by foreign companies to stock up on USA goods before Trump's trade war escalated and tariffs kicked in on many products. Trump has said he sees annual growth of 3 percent or more as sustainable. It's the first time the economy has grown more than 4 percent in a quarter since 2014. That followed a downwardly revised 0.5 percent pace of consumption growth in the prior three months. Growth will slow, but we may not have a recession.

The front-loading of soybean exports, however, depleted farm inventories. "If growth continues at 3.0% the next two quarters, then real GDP growth will indeed make it to 3.1 percent on a Q4/Q4 basis", he wrote.

In addition to lower taxes, consumers' purchasing power is benefiting from steady hiring, an unemployment rate that's near the lowest since 1969, improving finances, relatively low borrowing costs and contained inflation.

Business spending, which is getting a boost from lower corporate taxes, is one of the factors supporting a projected pickup in second-quarter economic growth.

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Nonresidential fixed investment - reflecting spending on commercial construction, equipment and intellectual property products - rose at a 7.3 per cent rate. His two-term average of 1.6 percent annual growth is the worst among post-World War II presidents.

The export rally likely reflected efforts by buyers to get their soybeans before China's 25 per cent retaliatory tariffs on United States soybeans, which hit in July. Government spending grew at a 2.1 per cent rate, quickening from the first-quarter's 1.5 per cent pace. A bump in federal government spending also added to the pickup in growth this spring as Congress approved additional money for the military and domestic programs.

In the April-June period, consumer spending had its biggest bounce in almost four years, with Americans buying more cars and spending more liberally on health care, housing, utilities, restaurants and hotels, according to the Commerce Department report. Both rates and stocks have cooled recently, but stocks have leveled off at a range that anticipates an economy that will grow significantly faster than it has.

Everybody wins when we grow the economy - Democrats and Republicans alike. "This will support the outlook for 3 percent-plus growth in 2018 and continued Fed policy to raise the funds rate in September".

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