Gross domestic product grew at a solid 4.1 percent pace in the second quarter, its best pace since 2014, boosting hopes that the economy is ready to break out of its decade-long slumber.
The number matched expectations from economists surveyed by Reuters and was boosted by a surge in consumer spending and business investment. Stock market futures edged lower on the news while government bond yields moved lower.
“We’re on track to hit the highest annual growth rate in over 13 years,” President Donald Trump said in remarks an hour after the report hit.
“And I will say this right now and I will say it strongly, as the deals come in one by one, we’re going to go a lot higher than these numbers, and these are great numbers.”
One can only hope the economic boom will rattle the minds of budding young socialists who have an aversion to capitalism.
In addition to the rise in consumer and business spending, increases in exports and government spending also helped. Personal consumption expenditures rose 4 percent while business investment grew 7.3 percent and federal government outlays increased by 3.5 percent, reports CNBC.
Exports rose in part as farmers rushed to get soybeans to China ahead of expected retaliatory tariffs to take effect in the coming days. Declines in private inventory investment and residential fixed investment were the main drags, the report said.
The tariffs as well as last year’s massive tax cut both were key factors in the growth.
“Bottom line, if it wasn’t for a big upside to inflation, GDP would have been much better because of the upside in spending, boost in exports and government spending which offset an unexpected sharp decline in inventories and no change in gross private investment,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group.
“We hope capital investment continues to improve in light of the tax incentive to ramp up,” he added. “The consumer has tax cuts and higher wages on one side and a low savings rate and a recent credit card binge on the other.”
The administration has used a mix of tax cuts, deregulation and spending increases to goose growth. White House budget director Mick Mulvaney told CNBC earlier this week that deregulation likely has had the most impact so far as companies feel more comfortable about committing capital.
In a move that stunned the entire nation, the much maligned CNN gave Trump credit for the economic boom the nation is enjoying.
President Donald Trump thinks he’s overdue some credit for steering the strongest economy on the planet — and he’s probably right.
“These numbers are very, very sustainable — this isn’t a one-time shot,” Trump said on Friday, speaking from the South Lawn of the White House after news that the US economy grew at a 4.1% annual rate in the second quarter of the year.
Fresh from a trip to the Midwestern heartlands, the President is making the very best possible case for his administration as the pace heats up ahead of the midterm elections. He’s belting out a strong economic message with a fervor that Democrats have yet to match this election cycle.
Presidents usually get too much blame when the economy is doing badly, since downturns are often caused by outside shocks or cyclical factors, but that also gives them a chance to crow when things are going full steam ahead.
Trump is not the kind of person to pass that up.
Often, the President’s hyperbolic assessment of his own performance is at odds with the facts. But Friday’s announcement that the economy grew at a 4.1% pace in the second quarter is genuine cause for celebration.
It may also be his best chance to argue that a huge and controversial tax cut, the only really significant legislation he has managed to pass, is — as he said it would — unleashing prosperity.
“We’ve never seen anything like (what) is going on right now,” Trump told a hugely supportive crowd of steelworkers in Illinois on Thursday.
“GDP numbers will be announced tomorrow sometime. I don’t know what they are, but I think they’re going to be terrific,” he added. “You know, when we took over it was really low, and it was heading lower, a lot lower. And it was going to be there fast. And great things have happened. So, whatever those numbers are, watch for them. Somebody actually predicted today, 5.3 (%). I don’t think that’s going to happen.”
James E Windsor, Overpasses News Desk
July 27th, 2018