US President Donald Trump is on a roll, scoring yet another win as the US Gross Domestic Product (GDP) hit 4.1 per cent after four years, paving the way for the Trump administration to achieve its target of 3 per cent annual growth.
The Commerce Department’s announcement of the strong GDP yesterday comes after President Trump said a few days ago that the US has the “best financial numbers on the planet.” After the report dropped, President Trump said:
“We’re on track to hit the highest annual growth rate in over 13 years. 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.”
White House officials also hinted that the reading will be strong prior to the Commerce Dept’s announcement, while National Economic Council Chairman Larry Kudlow predicted two days ago that GDP in the second quarter of Apr-Jun 2018 will be “big.”
The impressive GDP this past quarter is nearly double the 2.2 per cent pace from the first quarter of the year. Compared to the same period last year, GDP this year has grown by a hefty 2.8 per cent.
Economic growth in the second quarter – which is the strongest since the third quarter of 2014 – appears to have been spurred on by increased consumer spending and as US farmers rushed shipments of their crops to China to bypass the retaliatory trade tariffs that were implement earlier this month.
Driven by lower taxes and a strong labor market, which created an average of 215,000 jobs per month between January and June this year, consumer spending accelerated by a steady 4 per cent, after the 0.5 per cent that was reported in the last quarter.
With households purchasing big items like motor vehicles and spending more on healthcare, utilities, food and accommodation, consumer spending – which constitutes more than two-thirds of US economic activity – grew as business spending went up by 7.3 per cent.
While the Trump administration may be rejoicing, economists have warned that this surge may wane in the future as trade tensions put pressure on businesses, that may in turn discourage consumer spending.
Despite this, the US economy this year is shaping up to boast some of the best numbers in recent times, with increased government spending and the $1.5 trillion tax cut package and increased government spending.
For now, strong economic performance will allow the Federal Reserve to go ahead with its plan to raise interest rates two more times this year, after the second borrowing costs hike was implemented by the US central bank last month.