Top Obama Economist: GDP Even Stronger Than It Looks

Team Trump is looking to get ahead of the next jobs crisis

President Donald Trump said the USA economy is on track to reach an annual growth rate of more than 3 per cent, as he celebrated a report Friday that the economy expanded in the second quarter at the fastest pace in four years.

A revised estimate for the first quarter showed that in the first three months of the year growth was 2.2 per cent.

On Friday, the U.S. Bureau of Economic Analysis announced that the U.S. economy increased at an annual rate of 4.1 per cent in the second quarter of 2018.

TRUMP: "The Canadians, you have a totally closed market. they have a 375 percent tax on dairy products, other than that it's wonderful to deal". US President Donald Trump cheered the numbers, holding an impromptu press conference outside the White House to tout the "amazing" growth and said "this is just the beginning". "Everywhere we look we are seeing the effects of the American economic miracle".

The second quarter growth was the fastest one since the 4.9 percent growth recorded in the third quarter of 2014 and the third-best growth rate since the 2008 economic recession.

Of course there will be criticism (including from me) on how Trump got this growth. This is a strong economy.

Yet, Canadian businesses are pressuring the federal government to embrace Mr. Trump's economic policies - minus the protectionism, of course.

"We are now on track to hit an average GDP annual growth of over three percent and it could be substantially over three percent", Trump said. "This isn't a one-time shot", he said. "Next quarter, I think it's going to be outstanding". But economists warn it's unlikely to last.

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Joel Schreurs, a soybean farmer from Tyler, Minnesota, said the plan was a "good start" but not a fix that works in the long run. The E.U. subsequently retaliated with tariffs on a number of US goods.

Yet, at least for the second quarter of this year, the stars have aligned, and, as many analysts predicted, gross domestic product grew by an annual 4.1 percent.

Chad Moutray, chief economist for the National Association of Manufacturers, credited the growth spurt to Trump administration policies.

Exports are a particularly dramatic example.

But the report got another boost from an unusual source: strong exports which leapt 13.3 per cent, driven higher by foreign sales of oil and soybeans, which now face stiff Chinese tariffs. And the temporary boost in government spending will turn into a drag on the economy when that spending splurge winds down in 2019 and 2020.

Mr. Trump, who reached a truce this week with the European Union in a trade war, also noted that the US trade deficit fell by $52 billion in the second quarter. Consumer spending in the second quarter, adjusted for prices, surged at a 4.0-percent annualized pace, well above expectations of a 3-percent rise. But, he says, that growth in spending will fizzle.

All the same, Friday's news is quite positive for the man who promised economic growth north of 4 percent - now he has to sustain that growth. "And the year-over-year growth rate is just above the long term trend of 1.8 percent". Shepherdson predicts about the same.

Business spending on equipment slowed and a further moderation is likely, with trade wars casting a pall on the business spending outlook.

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