Trump hails US growth at a four-year high
President applauds ‘great GDP numbers’ but his critics predict the boom will be short-lived
BOOMING consumer spending, export growth, investment and government spending all pushed US economic growth to a four-year high.
Gross domestic product (GDP) surged by 4.1pc in the second quarter, on an annualised basis, up from 2.2pc in the first three months of the year to record its strongest result since the third quarter of 2014.
The initial estimates from the Bureau of Economic Analysis indicate President Donald Trump may be able to declare victory in his election campaign pledge to double the rate of growth.
Growth ran at an average of just over 2pc per year over the four years before he took office, so that increased pace has now been achieved.
Mr Trump hailed the data as “great GDP numbers”.
“Once again we are the economic envy of the entire world,” he said. “America is being respected again and America is winning again because we are finally putting America first.
“Everywhere we look we are seeing the effects of the economic miracle,” the president added.
Economists believe his tax cuts are a key factor giving businesses and consumers more money and more confidence.
James Knightley, chief international economist at ING, said: “In terms of the outlook, trade tariffs and worries about protectionism appear to be making business a little cautious, but we have to remember that the effective tax hike from the tariffs enacted so far are dwarfed by the $1.5 trillion [£1.1trillion] of tax cuts on wages and profits.”
He added: “As such household incomes and corporate cash flows are in great shape with the high frequency data suggesting the US has good momentum for the second half of the year.”
Consumer spending growth accelerated to 4pc while non-residential investment increased by 7.3pc – a slight slowdown on the quarter but still high by historical standards.
Goods exports surged by 13.3pc – the strongest expansion since late 2013 – while imports only edged by 1pc.
As a result, net trade added 1.1 percentage points to growth and the trade deficit narrowed.
However, economists question whether it will be possible for the US to maintain this rapid expansion for very long. Ian Shepherdson at Pantheon Macroeconomics expects consumption, trade and inventory growth will all slow in the coming months, taking third-quarter GDP growth to an annualised 3pc.
“The message, then, is that if you borrow enough money from your grandchildren and throw it at the economy, it will grow faster, for a while,” he said.
“You just have to hope your grandchildren are big on the forgiveness front when the cheque for your not-sofree lunch arrives.”