Economic Growth Slowed To 2.1% 2nd Quarter vs Trump’s Promised 4,5,Even 6% GDP (#GotBitcoin?)
The U.S. economy slowed but still grew at a solid clip in the second quarter as strong consumer spending offset a drop in business investment, keeping the decade-long expansion on track amid trade tensions and cooling global activity. Economic Growth Slowed To 2.1% 2nd Quarter vs Trump’s Promised 4,5,Even 6% GDP (#GotBitcoin?)
Gross domestic product, a broad measure of goods and services produced across the economy, rose at a 2.1% annual rate in the second quarter, adjusted for seasonality and inflation, the Commerce Department said Friday.
That marked a pullback from a 3.1% pace in the first quarter, when growth was partly driven by a jump in inventories and exports and a fall in imports—factors that reversed in the April-June period.
President Trump said on Twitter Friday morning that the 2.1% figure was “not bad considering we have the very heavy weight of the Federal Reserve anchor wrapped around our neck.” Mr. Trump has attacked the Fed for months and called for the central bank to cut interest rates to boost growth.
Businesses took a more cautious approach to spending in the second quarter, causing their investment to decline for the first time since early 2016, the report showed. Nonresidential fixed investment—which reflects spending on software, research and development, equipment and structures—fell at a 0.6% rate, compared with a 4.4% rise in the first quarter.
One factor that generated uncertainty for businesses in the second quarter was the international trade situation, as the U.S. increased levies on Chinese goods and threatened, but didn’t implement, tariffs on Mexican imports.
Joe Baiz, president of Phoenix-based plastic-injection-mold manufacturer 4front Manufacturing, said business “slowed a little bit in the second quarter” as worries over trade policy generated “a lot of fear of the unknown.”
For American multinationals, “the number one concern is around trade and tariffs and what’s going to happen there,” said Sanford Cockrell, a managing partner at Deloitte LLP. As chief financial officers begin setting budgets for the 2020 fiscal year, “it’s very difficult to budget in an environment where you really don’t know where you’re going to end up on tariffs,” he said.
Trade itself was a drag on growth, as exports fell at a 5.2% rate while imports rose slightly, expanding the deficit.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, said, “The simple proposition is that the trade war made manufacturing weaker and the tax cut made consumer spending stronger.”
Shoppers picked up the slack in the second quarter. Consumer spending, which accounts for more than two-thirds of the economy, rose at an inflation-adjusted, annualized rate of 4.3% in the second quarter, up from its first-quarter pace of 1.1% and marking the strongest reading since late 2017.
Americans ramped up their spending on big-ticket items like cars as well as everyday goods like food and clothing.
Government expenditures also boosted growth, rising at a 5.0% annual rate in the second quarter, partly a rebound from the effects of the federal government shutdown that started in the fourth quarter and stretched into late January.
Friday’s report is one of the last major readings of the economy’s temperature Fed officials will see before their policy meeting July 30-31. They are prepared to cut their benchmark interest rate by a quarter percentage point from its current range between 2.25% and 2.5% and signal more reductions to come to bolster the U.S. economy at a time of cooling global momentum.
The divergent signals from strong consumer spending and weakening business investment leave a mixed picture. The economy remains supported by low unemployment and rising incomes, but slowing global growth and trade uncertainties are weighing on the outlook.
Growth readings can be volatile from quarter to quarter. Output rose 2.3% in the second quarter from a year earlier.
Signs of business caution appeared in many corners of the GDP report.
The rate of investment in business structures alone—such as factories and health care facilities—declined at a 10.6% pace in the second quarter while equipment spending advanced at a meager 0.7% rate.
Businesses drew down their stocks in the second quarter rather than built them up. Private, nonfarm inventory investment subtracted 0.85 percentage point from the quarter’s 2.1% GDP growth rate.
Housing was a headwind for growth for the sixth quarter in a row as residential investment fell at a 1.5% annual pace, despite falling mortgage rates in the April to June period.
Inflation firmed in the second quarter. The price index for personal-consumption expenditures increased at a 2.3% annual pace in the second quarter, a pickup from a 0.4% rate in the first quarter. Core prices—which exclude food and energy—rose at 1.8% rate. The Fed seeks to keep inflation at 2% because it sees that as consistent with a healthy economy.
Many economists expect growth this year of around the 2.3% averaged during the current expansion, which started in mid-2009 and this month became the longest on record. Fed officials’ median projection in June was for 2.1% growth from the fourth quarter of 2018 to the fourth quarter of 2019.
Many economists started 2019 expecting growth this year to slow from 2018’s 2.9% pace because of the waning effects of tax cuts and federal spending increases.
Earnings for the S&P 500 appear to have grown in the second quarter at their most anemic pace since mid-2016.
Earnings per share are expected to rise just 0.2% over second-quarter 2018, according to an estimate from financial-data firm Refinitiv, which combines analyst estimates with actual results from the 37% of companies that have already reported.
Many executives said the second quarter was slower than the same period in 2018, but business remains steady.
“Last year was stronger but it’s still OK,” said Keith Baldwin, president of Spike’s Trophies Ltd., a , Philadelphia-based manufacturer of awards and recognition products. “There’s a little bit of caution but it’s still OK.”
Higher consumer spending offset a decline in business investment.
Meanwhile: December 7, 2017
Trump Thinks The U.S. Could See 6% Economic Growth. The Data Says Otherwise.
President Donald Trump is feeling pretty good about the United States’ economic prospects.
On Wednesday, Trump told reporters that he expects to see a 6% annual growth rate. That might not sound like a wild number, until you consider that 6% more than doubles the 30-year average rate of 2.5%. Six percent is also more than triple what the Congressional Budget Office forecasts for the next ten years.
According to Bloomberg, Trump claimed that the combination of high consumer confidence, job creation, and tax cuts would create this considerable growth. Trump claimed that he sees “no reason why we don’t go to 4, 5, even 6%.”
Unfortunately, Trump didn’t explain exactly how this jump would happen, and few economists support his claim. In a Bloomberg survey of 80 economists, only one forecast showed a growth above 4%. The median was 2.5%—which has long been the average. What’s more, the Joint Committee on Taxation found that the potential growth from the GOP tax plan would only add 0.8% to the current forecast over the next decade.
While Trump’s ambition does not appear to be rooted in sound economic analysis, it is not the first time he has painted an overly rosy outlook for the U.S. economy. In August, Trump compared the U.S.’s 2% annual growth over the last decade with other countries that are “unhappy when it’s 7, 8, 9%.” With these other economies as a model, Trump claimed at the time that he thinks “we can go much higher than 3%. There’s no reason why we shouldn’t.” What he failed to mention is that only seven of the close to 200 countries tracked by the IMF have seen more than 7% growth over the last year. Economic Growth Slowed To,Economic Growth Slowed To,Economic Growth Slowed To,Economic Growth Slowed To
One Of Trump’s Biggest And Best Campaign Promises Has Been Exposed As A Worthless Sham
Bad news about infrastructure is as ubiquitous as potholes. Failures in a 108-year-old railroad bridge and tunnel cost New York commuters thousands of hours in delays. Illinois doesn’t regularly inspect, let alone fix, decaying bridges. Flooding in Nebraska caused nearly half a billion dollars in road and bridge damage—just this year.
No problem, though. President Donald Trump promised to fix all this. The great dealmaker, the builder of eponymous buildings, the star of “The Apprentice,” Donald Trump, during his campaign, urged Americans to bet on him because he’d double what his opponent would spend on infrastructure. Double, he pledged!
So far, that wager has netted Americans nothing. No money. No deal. No bridges, roads or leadless water pipes. And there’s nothing on the horizon since Trump stormed out of the most recent meeting. That was a three-minute session in May with Democratic leaders at which Trump was supposed to discuss the $2 trillion he had proposed earlier to spend on infrastructure. In a press conference immediately afterward, Trump said if the Democrats continued to investigate him, he would refuse to keep his promises to the American people to repair the nation’s infrastructure.
The comedian Stephen Colbert described the situation best, saying Trump told the Democrats: “It’s my way or no highways.”
The situation, however, is no joke. Just ask the New York rail commuters held up for more than 2,000 hours over the past four years by bridge and tunnel breakdowns. Just ask the American Society of Civil Engineers, which gave the nation a D+ grade for infrastructure and estimated that if more than $1 trillion is not added to currently anticipated spending on infrastructure, “the economy is expected to lose almost $4 trillion in GDP, resulting in a loss of 2.5 million jobs in 2025.”
Candidate Donald Trump knew it was no joke. On the campaign trail, he said U.S. infrastructure was “a mess” and no better than that of a “third-world country.” When an Amtrak train derailed in Philadelphia in 2015, killing eight and injuring about 200, he tweeted, “Our roads, airports, tunnels, bridges, electric grid—all falling apart.” Later, he tweeted, “The only one to fix the infrastructure of our country is me.”
Donald Trump promised to make America great again. And that wouldn’t be possible if America’s rail system, locks, dams and pipelines—that is, its vital organs—were “a mess.” Trump signed what he described as a contract with American voters to deliver an infrastructure plan within the first 100 days of his administration.
He mocked his Democratic opponent Hillary Clinton’s proposal to spend $275 billion. “Her number is a fraction of what we’re talking about. We need much more money to rebuild our infrastructure,” he told Fox News in 2016. “I would say at least double her numbers, and you’re going to really need a lot more than that.”
In August of 2016, he promised, “We will build the next generation of roads, bridges, railways, tunnels, seaports and airports that our country deserves. American cars will travel the roads, American planes will connect our cities, and American ships will patrol the seas. American steel will send new skyscrapers soaring. We will put new American metal into the spine of this nation.”
In his victory speech and both of his State of the Union addresses, he pledged again to be the master of infrastructure. “We are going to fix our inner cities and rebuild our highways, bridges, tunnels, airports, school, hospitals. … And we will put millions of our people to work,” he said the night he won.
That sounds excellent. That’s exactly what 75 percent of respondents to a Gallup poll said they wanted. That would create millions of family-supporting jobs making the steel, aluminum, concrete, pipes and construction vehicles necessary to accomplish infrastructure repair. That would stimulate the economy in ways that benefit the middle class and those who are struggling.
That contract Trump signed with American voters to produce an infrastructure plan in the first 100 days: worthless. It never happened. He gave Americans an Infrastructure Week in June of 2017, though, and at just about the 100-day mark, predicted infrastructure spending would “take off like a rocket ship.” Two more Infrastructure Weeks followed in the next two years, but no money.
Trump finally announced a plan in February of 2018, at a little over the 365-day mark, to spend $1.5 trillion on infrastructure. It went nowhere because it managed to annoy both Democrats and Republicans.
It was to be funded by only $200 billion in federal dollars—less than what Hillary Clinton proposed. The rest was to come from state and local governments and from foreign money interests and the private sector. Basically, the idea was to hand over to hedge fund managers the roads and bridges and pipelines originally built, owned and maintained by Americans. The fat cats at the hedge funds would pay for repairs but then toll the assets in perpetuity. Nobody liked it.
That was last year. This year, by which time the words Infrastructure Week had become a synonym for promises not kept, Trump met on April 30 with top Democratic leadersand recommended a $2 trillion infrastructure investment. Democrats praised Trump afterward for taking the challenge seriously and for agreeing to find the money.
“It couldn’t have gone any better,” Ways and Means Committee Chairman Richard E. Neal, D-Mass., told the Washington Post, even though Neal was investigating Trump for possible tax fraud.
Almost immediately, Trump began complaining that Democrats were trying to hoodwink him into raising taxes to pay for the $2 trillion he had offered to spend.
Trump and the Republicans relinquished one way to pay for infrastructure when they passed a tax cut for the rich and corporations in December of 2017. As a result, the rich and corporations pocketed hundreds of billions—$1 trillion over 10 years—and Trump doesn’t have that money to invest in infrastructure. Corporations spent their tax break money on stock buybacks, further enriching the already rich. They didn’t invest in American manufacturing or worker training or wage increases.
Three weeks after the April 30 meeting, Trump snubbed Democrats who returned to the White House hoping the president had found a way to keep his promise to raise $2 trillion for infrastructure. Trump dismissed them like naughty schoolchildren. He told them he wouldn’t countenance Democrats simultaneously investigating him and bargaining with him—even though Democrats were investigating him at the time of the April meeting and one of the investigators—Neal—had attended.
Promise Not Kept Again
Trump’s reelection motto, Keep America Great, doesn’t work for infrastructure. It’s still a mess. It’s the third year of his presidency, and he has done nothing about it. Apparently, he’s saving this pledge for his next term.
In May, he promised Louisianans a new bridge over Interstate 10—only if he is reelected. He said the administration would have it ready to go on “day one, right after the election.” Just like he said he’d produce an infrastructure plan within the first 100 days of his first term.
He’s doubling down on the infrastructure promises. His win would mean Americans get nothing again. Economic Growth Slowed To, Economic Growth Slowed To, Economic Growth Slowed To, Economic Growth Slowed To