Trump hails growth as one-offs and consumers boost economy

WASHINGTON: The US economy grew at its fastest pace in nearly four years in the second quarter as consumers boosted spending and farmers rushed shipments of soybeans to China to beat retaliatory trade tariffs before they took effect in early July. President Donald Trump, who ahead of Friday’s release of the gross domestic product report had promoted the notion that second-quarter growth would be robust, declared victory.
“We have accomplished an economic turnaround of historic proportions,” Trump told reporters. “These numbers are very, very sustainable.”
Gross domestic product increased at a 4.1 per cent annualised rate also as government spending picked up, the Commerce Department said in its snapshot of second-quarter GDP. While that was the strongest performance since the third quarter of 2014, it was not the best since the recession ended in mid-2009.
January-March quarter GDP growth was revised up to a 2.2 per cent pace from the previously reported 2.0 per cent rate to account for updated information and methodology improvements.
Compared to the second quarter of 2017, the economy grew 2.8 per cent. Output expanded 3.1 per cent in the first half of 2018, putting the economy on track to hit the Trump administration’s target of 3 per cent annual growth.
Contrary to Trump’s assertions, the economy enjoyed periods of robust growth during the Obama administration. GDP growth recorded a 5.1 per cent pace in the second quarter of 2014 and the economy experienced four quarters of output above a 4.0 per cent rate.
Economists also cautioned against putting much weight on the surge in second-quarter growth as one-off factors, including a $1.5 trillion tax cut package, were behind the growth spurt. The soybean boost is likely to reverse in the coming quarters and the fiscal stimulus is seen fading in 2019.
“Pop the champagne today, but don’t get used to it, growth going forward has a lot of headwinds,” said Chris Rupkey, chief economist at MUFG in New York. “Unless you cut taxes again, there won’t be additional tax cut monies to line company and consumer pocket books.”
The United States slapped 25 per cent 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 US-made cars. Trump has also imposed tariffs on steel and aluminium imports, leading to retaliation by the United States’ main trade partners, including Canada, the European Union, Mexico and China.
— Reuters