President Trump campaigned on the promise to boost economic growth to 4%, and that’s exactly what we’re seeing now.
The US Commerce Department on Friday reported 4.1% GDP growth for Q2 (April-June), which marks the strongest performance since Q3 of 2014. Growth during Q1 of 2018 was 2.2%.
Experts say the second quarter figure is probably enough to push the economy over the sought-after 3% growth rate for the year.
“This is a boom that will be sustainable as far as the eye can see,” says National Economic Council Chairman Larry Kudlow. “This is no one-shot effort.”
Consumer spending (which makes up nearly 70% of economic activity) increased by 4% compared to Q1’s slow rate of 0.5%. The average American household spent more money on cars, healthcare, food, utilities, and accommodation. This increased spending is related to lower taxes and a robust labor market – which during the first half of 2018 created 215,000 jobs per month.
There was a noticeable slowdown in business spending, which was reported at 3.9% compared to Q2’s 8.5%.
Government spending grew at a 2.1% rate compared to 1.5% during Q1.
Numbers for Q2 are in line with promises from the Trump Administration that GOP tax reform and regulatory policies would boost economic growth.
“Our country is doing GREAT. Best financial numbers on the planet,” tweeted Trump on Tuesday. “Great to have USA WINNING AGAIN!”
A key factor in the surge was a 9.3% jump in exports as foreign buyers scrambled to stock up on US-made products in advance of retaliatory tariffs.
The retaliatory tariffs come in response to Trump’s tax on steel and aluminum and his 25% tariff on $34 billion worth of Chinese goods.
“With the trade-related boost expected to unwind in the second half of the year, economists caution against putting much weight on the surge in the April-June quarter growth,” notes Newsmax. “The economy will this year be supported by a $1.5 trillion tax cut package and increased government spending.”
Those who predict a slowdown in upcoming months and years insist the current growth rate isn’t sustainable. Just take a look at the way the liberal media announced the boom:
- Trump cheers ‘amazing’ economic growth as economists caution it could be a blip (Washington Post)
- GDP grew at 4.1% rate in US in latest quarter. Here’s what that means. (NY Times)
“In one line: looks great; won’t last,” said British economist Ian Shepherdson. “If you borrow enough money from your grandchildren and throw it at the economy, it will grow faster, for a while.”
The Federal Reserve predicts annual growth to be 2.8% this year, 2.4% the following year, and 2% for 2020.
In the meantime, Trump’s taxes on steel and aluminum (as well as the retaliatory tariffs) are starting to take a toll on manufacturers.
Ford, GM, and Chrysler have already decreased profit forecasts. And Harley-Davidson says it expects to lose between $45 and $55 million this year from the tariffs.
But things might not be as bad as they seem.
On Wednesday, President Trump and European Commission President Jean-Claude Juncker announced they were working towards a zero-tariff future.
Existing tariffs will remain in effect for the time being, but officials said they were trying to “resolve” the steel and aluminum tariff as well as the taxes the EU imposed on the US in response.