Among many of Trump’s campaign goals was to use tax cuts, deregulation, and new trade deals to increase America’s GDP to 4% or better.
But alongside the unveiling of Trump’s tax plan comes reports that economic growth is slow – really slow. As reported by Newsmax, first quarter growth was “the weakest performance in three years.”
In a report released on Friday, the Commerce Department puts first quarter growth at just 0.7 percent – compared to 2.1 percent during the fourth quarter. Consumer spending grew 0.3 percent during the first quarter, compared to 3.5 percent during the fourth quarter.
This is the “poorest showing in more than seven years,” reports Newsmax.
Many have been quick to blame the slowdown on Trump’s election, but it seems to me that increased spending during the holiday season followed by a reduction in spending during the first months of a new year is commonplace.
The slowdown has also been blamed on reduced government spending and unseasonably warm weather, the latter of which led to a significant decrease in utility spending.
Weak first quarter growth is a trend that has partially been blamed on the government’s inability to adjust its figures for seasonal changes. The Bureau of Economic Analysis is currently involved in a 3-year program to address this problem.
Let’s not forget that Trump inherited a poor economy. Last year’s GDP was just 1.6 percent, the weakest we’ve seen in 5 years. Economists expect this year’s growth to be just above 2 percent, with growth during the April-June quarter to be about 3 percent.
“There are a lot of tailwinds behind consumers going into the spring, including low unemployment, better wage growth, high consumer confidence, and record stock prices,” says economist Mark Zandi. The unemployment rate is currently at about 4.5 percent, the lowest we’ve seen in nearly a decade.
Sal Guatieri, senior economist at BMO Capital Markets, says he expects government and consumer spending to bounce back soon. “Still, the report will mark a tough start to the administration’s high hopes of achieving 3 percent or better growth, not the kind of news it was looking for to cap its first 100 days in office.”
If anything, first quarter stats show that we’re in serious need of the type of policies Trump is proposing.
“We need the president’s tax plan regulatory relief, trade negotiations, and the unleashing of (the) American energy sector to overcome the dismal economy inherited by the Trump Administration,” says Commerce Sec. Wilbur Ross.
Unfortunately, Congress is unlikely to approve some version of the president’s tax plan until late this year, meaning the effects won’t be felt until 2018.