Trump touts economy: 'These numbers are very, very sustainable'

29 July, 2018, 02:56 | Author: Martin Tyler
  • Output expanded 3.1pc in the first half of 2018 putting the economy on track to achieve the Trump administration’s target of 3pc annual growth

But we already know that growth in the first quarter was only 2 percent, so there's little chance that all of 2018 will come in at 4 percent. There was also a front-loading of exports of other goods in the second quarter. And he has been trying to highlight economic gains ahead of the midterm elections.

In July, the USA and China imposed tariffs on $34bn of the other country's goods.

He pointed to new tax cuts, de-regulation, increased government spending and the continuing trade negotiations.

"We're on track to hit the highest annual average growth rate in over 13 years", Trump said in remarks at the White House.

President Trump got the big number he was looking for this week, when the government announced the economy grew by 4.1% in the second quarter. But housing, which has struggled this year, shrank at a 1.1 percent annual rate after an even sharper 3.4 percent annual decline in the first quarter. Trump has said he sees annual growth of 3 per cent or more as sustainable. "This is no one-shot deal", said Kudlow. And the president expects the strong growth to continue in the third quarter (July-September).

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Unlike in 2015, growth has accelerated this year, in part, because of the stimulus from Mr Trump's deficit-funded tax cuts.

With the trade-related boost expected to unwind in the second half of 2018, economists caution against putting much weight on the April-June quarter growth.

Friday's number nearly guarantees the Federal Reserve will raise interest rates two more times this year - to get to the total of four that had been expected in 2018.

There were some signs of softness, however.

"The spring quarter could be the high water mark for growth", said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania. And that gave the overall export numbers a big lift.

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In any case, I am skeptical that the trade deficit will shrink markedly in the near term, as the USA economy is stronger than that of most of our trading partners and in an economy suffering from a shortage of skilled labor, importing more to satisfy robust consumer and business demand can be a vital release valve. While that was the strongest performance since the third quarter of 2014, it was not the best since the recession ended in mid-2009. But today's economic data is certainly good, and the president can take some of the credit.

Trump also seemed to back down on his trade threats this week, after a meeting with European Commission President Jean-Claude Juncker.

Mr Trump, who has repeatedly attacked the economic record of his predecessor's administration, pledged during the 2016 campaign to double growth to four percent or better.

There are worries that America's numerous trade spats are now hitting economic growth. A measure of domestic demand surged at a 4.3 percent rate in the second quarter. "For that, we have to look at not just how "the economy" is doing, but how all the people in the economy are doing".

Most encouragingly of all, businesses have spent much more on "intellectual property", a category that encompasses a number of line items (e.g. computer software) that should correlate with innovation.

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