Trump Breaks Tradition on GDP Figures

Tinnaporn Sathapornnanont

The U.S. economy has surged to a 4.1 percent growth rate, and it's "an economic turnaround of historic proportions", President Donald Trump proudly said of the accomplishment.

That is the second quarter in a row the measure, known as core PCE, has hit or exceeded the Fed's 2% target, and is likely to keep the central bank on track with its plans to raise interest rates gradually. What Mr. Trump doesn't say is China's Gross Domestic Product Growth is more than six percent, and India's is more than seven percent.

Pay was growing even faster in the late 1960s, when the jobless rate remained below 4 percent for almost four years. This is a strong economy.

Most economists have a somewhat different take on the data. The stimulus is expected to fade sometime in 2019. The consensus forecast was for real GDP to post a 4.3% growth rate, an insignificant difference from the initial estimate published today.

His large package of tax cuts has boosted growth. Exports of USA soybeans soared as companies sought to ship them to China before that country slapped tariffs on them in retaliation for US tariffs on Chinese goods.

Otherwise, the growth will temper off. Trump has kept his promise for one quarter - but he may not be able to keep it for a whole year. And their reasoning is simple: That 4.1 percent growth rate is partially the product of temporary distortions in patterns of trade, and an ephemeral uptick in government spending. "Service prices rose 2.5 percent in Q1". U.S. stock index futures also pared gains. "A lot of economists think it is a one off and it will slow".

"This is a boom that will be sustainable as far as the eye can see", National Economic Council chairman Larry Kudlow said.

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.

FILE PHOTO - A shopper walks down an aisle in a newly opened Walmart Neighborhood Market in Chicago in this September 21, 2011 file photo.

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Economists have said exports largely increased in the last quarter amid efforts by U.S. companies to get products out before additional retaliatory tariffs take effect. When services are included, such as insurance, tourism, and engineering, the USA had a $2.8 billion surplus with Canada past year.

Households bought motor vehicles and spent more on health care, utilities, food and accommodation in the last quarter.

Another quarter of solid business spending on equipment is expected, though the pace has slowed from the double-digit growth experienced in the second half of 2017. "The bottom line is that the economy is doing better", Diane Swonk, chief economist for the accounting firm Grant Thornton, tells The New York Times.

Trade is forecast to have contributed at least 1.5 percentage point GDP growth in the second quarter after being neutral in the January-March period.

The rush to offload soybeans, however, depleted farm inventories.

But economists have begun to question whether it can continue at this pace in the face of trade tensions and rising rates. The change in the seasonals has clearly changed the distribution of growth over the course of the year. If anything, trade could curtail growth later this year if foreign companies buy less from the United States.

Investment in homebuilding fell for a second straight quarter.

Government expenditures were up at a 2.1 per cent annual rate in the second quarter.

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