TRUMP: U.S. ECONOMY ON A ROLL
But experts warn of trade war’s impact
President Trump raved about the GDP growth yesterday, saying the nation is seeing “an economic turnaround of historic proportions.”
The gross domestic product — the measure of goods and services produced in the U.S. — jumped 4.1 percent in the second quarter, the fastest growth rate in four years. During his remarks at the White House yesterday, Trump said the country is on track to hit the “highest annual average growth rate in over 13 years.”
He added, “We’re going to go a lot higher than these numbers.”
Though a significant growth rate, up from 2.2 percent in the first three months of the year, it was slightly lower than predicted, according to Ken Matheny, executive director of the U.S. Economics, Macroeconomic Advisers by IHS Markit, a data and analysis firm.
The president credited the “amazing” growth to his push for tariffs and trade policies. Despite criticism from both sides of the aisle regarding Trump’s approach, experts say the tax cuts and trade deals likely influenced this economic growth, but it won’t last for long.
Professor Bob Murphy of the economics department at Boston College warned that neither of those factors is sustainable, and the growth rate will most likely drop back down to an average base of about 2 percent.
“The number that came in today shows that the economy grew, and it grew at a relatively impressive pace,” Murphy said. “A rapid growth rate like we’re seeing this quarter is usually due to one-off factors.”
The growth was boosted in part by a surge in consumer spending due to the tax cuts, as well as trade deals, Murphy said.
“When you have tax cuts, that provides more takehome pay for households. Or if you give corporate tax cuts to businesses, they therefore have higher profits so they’re likely to spend more,” Murphy said.
Another factor is the country’s exports, goods that the U.S. sells to other countries, which rose 9.3 percent. Some countries stocked up on American products before the upcoming tariffs, specifically in the agricultural sector with products such as soybeans, Murphy said.
“That might have boosted it too, which is ironic because the longer trade war will lead to slower growth in exports and, ultimately, a slower growth in the economy,” Murphy said.
The Massachusetts economy also took off in the second quarter, at a 7.3 percent rate powered by strong gains in employment, earnings and consumer and business spending, according to data released by the economic journal Mass Benchmarks.