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Trump hails US economic growth spurt, promises more ahead
WASHINGTON, July 28, 2018 (BSS/AFP) – President Donald Trump on Friday
hailed roaring US economic growth as a “miracle,” and said the quickest
expansion in almost four years was a vindication of his economic agenda.
With the size of the American economy now surpassing $20 trillion, GDP
expanded by 4.1 percent in the April-June quarter, making the United States
the fastest-growing of advanced countries, according to a government report.
“We’re on track to hit the highest annual average growth rate in over 13
years,” Trump said in remarks at the White House. “Everywhere we look, we’re
seeing the effects of the American economic miracle.”
The second quarter acceleration came in part after the injection of
stimulus and Republican tax cuts.
But economists warned it could be a blip caused by temporary factors,
including a one-off bounce produced by Trump’s trade confrontation with
China.
The robust results put growth in the first half of the year at just over
three percent, matching a White House target and faster than the trend in
previous years.
Trump said the United States was “the economic envy of the world,” and “As
the trade deals come in one by one, we are going to go a lot higher than
these numbers and these are great numbers.”
His jubilation did not extend to Wall Street, where stocks closed down
markedly as investors feared the economy has peaked and amid disappointing
earnings and trade war fears.
In the April-June period, consumer spending had its biggest bounce in
nearly four years, with Americans buying more cars and spending more
liberally on health care, housing, utilities, restaurants and hotels,
according to the Commerce Department report.
Purchases of goods jumped 5.9 percent — with the largest contribution
coming from booming auto sales — while services rose 3.1 percent.
But the report got another boost from an unusual source: strong exports
which leapt 13.3 percent, driven higher by foreign sales of oil and soybeans,
which now face stiff Chinese tariffs.
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Analysts said that increase was due to stockpiling by Chinese importers
before Beijing’s retaliatory tariffs on US goods hit in July, which means
trade is likely to fall off in the third quarter, dragging down the growth
rate.
– Accelerating in a trade war? –
But Trump nevertheless focused on the sudden drop in the US trade deficit
as another triumph for his tough trade policies.
“Perhaps one of the biggest wins in the report, it is indeed a big one, is
that the trade deficit, very dear to my heart because we’ve been ripped off
by the world, has dropped by more than $50 billion,” Trump said.
The report showed imports rose only 0.5 percent, the smallest increase in
two and a half years.
Also contributing to economic growth, spending by state and local
governments rose 1.4 percent.
The report fell short of the most bullish forecasts of five percent or
higher, with which Trump had teased audiences at events in Iowa and Illinois
as recently as Thursday.
The White House is counting on faster growth to pay for December’s
sweeping tax cuts by generating higher revenues. But federal tax receipts are
already plummeting, widening the federal budget deficit, just as the costs of
borrowing increase due to mounting interest rates.
Ian Shepherdson of Pantheon Macroeconomics said swings in inventories and
trade, as well as the fading effects from the income tax cuts could put
third-quarter growth at three percent.
“The message, then, is that if you borrow enough money from your
grandchildren and throw it at the economy, it will grow faster, for a while,”
he wrote in a research note.
Diane Swonk, chief economist at Grant Thornton, said the growth rate was
likely to meet the White House’s three percent target for the year and noted
that a sudden drop in business inventories in the second quarter could point
to a rebuild in the latter half of 2018.
“The question is, how much are firms willing to stock up with the threat
of a trade war?” she said in a research note.
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