Trump hails growth as one-offs and consumers boost economy

30 July, 2018, 23:04 | Author: Lucy Floyd
  • President Trump Speaking on Tariffs

Trump has promised to boost GDP growth above 3% on a sustained basis, and his hope for the second quarter was "anything with a four".

Joe Lavorgna, chief economist of the America at Natixis, said in a note Thursday that he expects GDP grew at an annualized rate of 4.7% in the second quarter with consensus indicating a year-on-year increase in real GDP of 3.1%. The second quarter figures included several one-time factors, that won't happen in the third quarter, according to economists.

The United States slapped 25 percent duties on $34 billion worth of Chinese goods effective July 6, provoking a similar response from Beijing, which targeted soybeans and other agricultural products as well as USA -made cars. Canada, Mexico and the European Union also imposed new duties in recent weeks on some U.S. exports in retaliation for U.S. tariffs on steel and aluminium. "Producers may have front-loaded some goods for exports ahead of the tariffs", JPMorgan's Feroli said. Now, I don't want to say that too much and I didn't want to say too much during the campaign because I would have been criticized, people wouldn't have believed it...

Compared to the second quarter a year ago, output grew 2.8 per cent.

First-quarter growth tends to undershoot the rest of the year because of the so-called residual-seasonality issue that stems from how the Commerce Department adjusts for calendar and holiday effects.

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The Trump Administration has said this is the beginning of a new era of stronger growth after the tax cuts and higher government spending, but the vast majority of independent economists see this quarter as a blip. Central bank officials had raised rates twice this year and pencilled in two further increases this year and three in 2019, Efe news reported.

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. But Trump thinks the second quarter growth figure will grow in the third and fourth quarter because his foreign policy plan is working.

The United States just had its strongest quarter of economic growth since 2014.

The US economy accelerated to a 4.1 percent pace of growth in the second quarter, the fastest since 2014, letting President Donald Trump claim a win for his policies even though expansion is projected to cool.

Americans have ramped up their spending after cutting back in the first three months of the year, encouraged by tax cuts that have left more money in their pockets.

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The president has been floating plans to slap import taxes on hundreds of billions of dollars of foreign goods, which has led to the risk of retaliatory tariffs by foreign companies on USA goods. That is expected to have sharply narrowed the trade deficit. Daniel Silver, an economist at JPMorgan Chase, forecast that soybean exports alone likely boosted GDP by 0.5 percentage point in the second quarter.

The import duties also likely prompted businesses to increase their pace of inventory accumulation.

The negative contributors to the economic growth were private inventory investment and residential fixed investment.

The US economy roared into high gear in the spring, growing at the fastest pace in nearly four years.

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