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GDP report proves Trump is turning the economy around

GDP report proves Trump is turning the economy around

Trump was responding to new growth numbers announced on Friday that show the US economy surged in the April-June quarter to an annual growth rate of 4.1 per cent - the fastest pace since 2014. And, ironically, Trump's various protectionist measures spurred a boom for US exporters - because foreign buyers were eager to stock up on American goods before their governments slapped retaliatory tariffs on such products.

President Donald Trump and his advisers trumpeted the numbers in a news conference outside the White House, saying that the economy was on pace to grow at the fastest rate in 13 years.

The growth "was mostly offset by a drag in inventories (-1.0pp) that seems likely to reverse in the third quarter, stated Goldman Sachs in a report".

As Jared Bernstein, senior fellow at the Center on Budget and Policy Priorities, observed in an analysis of the Commerce Department's new numbers for the Washington Post, "in our era of high economic inequality, GDP should definitely not be taken as a signal of broad well-being". "Going forward it's quite likely that we could see economic growth slowing from this sizzling rate in the second quarter".

"We've accomplished an economic turnaround of historic proportions", Trump told reporters during hastily arranged remarks on the South Lawn of the White House, where he was joined by Vice-President Mike Pence and flanked by members of his economic team. Trump came into office past year promising tax cuts, regulatory reform, and the elimination of foreign tariffs on USA exports.

They may be right - but if the economy does grow more than 3 percent for the entire year, it will be something of a milestone, in that it will be the first time since 2005 that we've seen that growth rate.

The second quarter growth was the fastest one since the 4.9 percent growth recorded in the third quarter of 2014 and the third-best growth rate since the 2008 economic recession. Economists had forecast 4.2% growth.

Trump has also imposed tariffs on steel and aluminium imports, leading to retaliation by the US's main trade partners, including Canada, the EU, Mexico and China. Soybeans exports, for example, surged 9,400 percent in the period from March to May over the prior year, Morgan Stanley said.

Output expanded 3.1pc in the first half of 2018, putting the economy on track to achieve the Trump administration's target of 3pc annual growth.

During Barack Obama's presidency, there were four quarters when annualised growth exceeded the level that Trump praised today. First, consumer spending rose 4 percent. "If one controls for the impact of the one-time increase in government spending, temporary tax boost and exports, that robust topline growth rate is closer to 3 percent".

For now, strong growth in the second quarter will keep the Federal Reserve on course to raise interest rates two more times this year. Government expenditures were up at a 2.1 per cent annual rate in the second quarter.


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