US economy surges to 4.1 percent growth in 2nd quarter

It’s not traditional for presidents to comment on economic growth figures before they are released, but President Trump isn’t exactly a stickler for tradition.

That modest assessment of the long-run rate implicitly resists arguments that Trump’s tax cuts will lift the economy’s potential to grow without hitting the speed-bump of inflation, though there’s a range of views among policy makers.

The growth was the fastest since 2014, following first-quarter growth of 2.2 percent that was revised up from 2 percent. The U.S. central bank increased borrowing costs in June for the second time this year and forecast two more rate hikes for 2018.

But since I like to play the provocateur – and because it’s healthy to be skeptical – let me tell you why you might not want to get too excited.

In the second quarter, the US recorded an 80% annualized jump in food, feed and beverage exports, mainly from soybeans and corn. The GDP estimate is the first of three for the quarter, with the other releases scheduled for August and September when more information becomes available. So the number could change dramatically. “I think the numbers are going to be outstanding”. “For that, we have to look at not just how “the economy” is doing, but how all the people in the economy are doing”.

The president has been floating plans to slap import taxes on hundreds of billions of dollars of foreign goods, which has led to the risk of retaliatory tariffs by foreign companies on US goods. This represents the strongest quarter of growth since 2014.

The President is upset that the USA central bank has raised interest rates twice so far this year, but it is precisely the Trump administration’s inflationary fiscal policies that have forced the Federal Reserve to tighten monetary policy faster than it would otherwise.

US factory employment is growing.

In ananalysisof recent economic trends on Thursday, New York Timescolumnist Thomas Edsall highlighted the “continued failure of wages to advance, despite job growth, while corporate profits shoot up to record levels”. And he delivered on those promises, by cutting government red tape and getting the biggest tax cut through Congress since President Reagan in 1981. And that’ll make the budget deficit and debt surge.

President Donald Trump said he was thrilled with what he called an “amazing” growth rate and said it wasn’t “a one-time shot”. For the market to get back to 130 percent, it would require a much more robust pace of growth. Compared to the second quarter a year ago, output grew 2.8 per cent. In fact, out of the 32 quarters that president Obama was in office, 15 of them had an annualized growth rate north of 2%.

But Federal Reserve officials and outside economists don’t expect a permanent upshift. The likelihood of a fourth rate hike, to come in December, is now 63 percent – up from 55.7 percent a week ago and 42 percent a month ago, according to CME Group’s FedWatch.

Also contributing to economic growth, spending by state and local governments rose 1.4 per cent.