Trump bullish on economy but whose re­cov­ery is it?

Kuwait Times - - BUSINESS -

As he rubs shoul­ders with lead­ers of the world’s other ma­jor economies, Don­ald Trump is in a bullish mood about the US re­cov­ery even if there are clouds on the hori­zon. “Stock Mar­ket at all time high, un­em­ploy­ment at low­est level in years (wages will start go­ing up) and our base has never been stronger!” the US pres­i­dent tweeted at the start of a week which ends with his at­ten­dance at the G20 sum­mit in Hamburg.

“No mat­ter where you look, the economy is blaz­ing,” he said in a July 4 In­de­pen­dence Day speech, a day be­fore head­ing to Europe. Trump, who fre­quently com­plains the US me­dia re­fuses to give him credit, can point to some heady fig­ures since his un­ex­pected election which was greeted glee­fully on the stock mar­kets. The Dow Jones In­dus­trial Av­er­age surged 17.2 per­cent since last Novem­ber’s election, while the broader S&P 500 gained 13.7 per­cent, and the tech-dom­i­nated Nas­daq 18.4 per­cent.

Bank­ing stocks in par­tic­u­lar soared amid prom­ises the sec­tor would see an eas­ing of reg­u­la­tions put in place in the wake of the 2008 fi­nan­cial cri­sis. The un­em­ploy­ment rate is only 4.3 per­cent while the trade deficit is shrink­ing with ex­ports in May at their high­est level in two years. Even so, ex­perts say Trump ap­pears to be tak­ing credit for ac­com­plish­ments-par­tic­u­larly on the jobs front-whose foun­da­tions were laid by his pre­de­ces­sor Barack Obama. And they also point out that Trump has lit­tle to show for in terms of pol­icy, with the much-touted tax re­forms and in­fra­struc­ture spend­ing pro­gram still just talk­ing points.

Mean­while, the promised health care over­haul, which in­cludes a huge tax cut for the wealthy, is strug­gling to get ap­proval in the Repub­li­can­con­trolled Se­nate. “I would say it is still Obama’s re­cov­ery,” said Joseph E. Gagnon of the Peter­son In­sti­tute for In­ter­na­tional Eco­nomics. “Noth­ing of sub­stance has changed yet, but mar­kets are clearly fo­cus­ing on what may change.”

Growth fore­casts cut

Trump swept to of­fice af­ter be­rat­ing Obama’s eco­nomic ac­com­plish­ments, say­ing too many peo­ple were be­ing left out of the re­cov­ery, and promis­ing to rev up growth to four per­cent. But the In­ter­na­tional Mon­e­tary Fund re­cently cut its growth fore­casts for the United States due to the ab­sence of any de­tails of the pro­pos­als that prompted the fund to raise its fore­cast in Jan­uary.

The IMF warned of “sig­nif­i­cant pol­icy un­cer­tain­ties” weigh­ing on the out­look as it re­verted to last year’s pro­jec­tion that the economy will ex­pand by 2.1 per­cent in 2017 and 2018, down from 2.3 per­cent and 2.5 per­cent, re­spec­tively. The Con­gres­sional Bud­get Of­fice also re­cently cut its fore­cast to 2.1 per­cent. The IMF also ques­tioned the ad­min­is­tra­tion’s prom­ise to ac­cel­er­ate growth to more than three per­cent-the more mod­est goal now es­poused by Trea­sury Sec­re­tary Steven Mnuchin-although he says achiev­ing that rate will take time. In­ter­na­tional ex­pe­ri­ence and US his­tory show only a few ex­am­ples of economies achiev­ing growth of that mag­ni­tude, and usu­ally only af­ter a re­ces­sion when un­em­ploy­ment is high, the IMF said. While the jobs sit­u­a­tion is healthy, such low un­em­ploy­ment leaves lit­tle room for the economy to grow with­out fu­el­ing in­fla­tion, un­less im­mi­gra­tion in­creases to fill job open­ings.


HAMBURG: US Pres­i­dent Don­ald Trump at­tends a work­ing ses­sion dur­ing the G20 sum­mit.

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