Trump looks for longer boost from economy
President TrumpDonald John TrumpPresenting the 2020 Democratic bracket The time has come for the Democrats to act, finally DHS expedites border wall replacement in Arizona, Texas MORE is getting a big boost from the economy, which grew at a strong rate of 3.2 percent in the first quarter of the year, according to statistics released Friday by the Commerce Department.
The growth beat expectations and was particularly strong for a first quarter, putting the president in a boastful mood as he touted the numbers during a speech at the National Rifle Association convention in Indianapolis.
He told the audience the gross domestic product (GDP) number “smashed expectations.”
“Our nation is greater today than it has ever been — stronger, richer,” Trump added. “We’re doing better than ever before.”
The president’s reelection effort is closely connected to the economy, as he hopes to ride a story about economic success to another four years in office.
The economy has added an average of 180,000 jobs each month this year, and the unemployment rate and weekly jobless claims have hovered near record lows.
The first quarter numbers are particularly good news for Trump because they prompted some economists to improve their outlook for 2019. Better-than-expected growth would give Trump a chance to say the economy during his presidency defied many experts’ initial forecasts.
Public and private-sector projections for the year saw growth slowing to a 2 percent annual rate as stimulus from government spending and tax cuts fade.
The mounting cost of global trade tensions, financial market volatility and concerns about recessions in Europe and China also dimmed the U.S. growth outlook at the end of 2018.
Yet the U.S. economy picked up steam, despite sluggishness earlier this year that raised concerns about a possible slowdown. The stock market has returned to record highs, and corporate earnings have largely beat expectations.
Friday’s strong GDP number capped off a month of largely positive economic news, leading some analysts to revise their projections upward.
Economists had expected GDP to expand at a roughly 2.5 percent rate for the first three months of the year, a decent rate for what is usually one of the slowest quarters for growth.
While growth blew past those expectations, some economists cautioned that the rate is likely to slow somewhat, even as it moves along at a healthy clip.
“While growth is unlikely to continue at this pace, real GDP growth for all of 2019 is likely to be a still solid 2.5 percent above the trend rate of growth of around 2.0 percent,” said Nationwide chief economist David Berson in a Friday research note. “The economy is doing better than it has since before the Great Recession.”
Economists have been on watch for a slowdown as the recovery from the recession approaches its 11th year. Three more months of economic growth would make this recovery period, which began in June 2009, the longest economic expansion in U.S. history.
The strength of the economy may very well make or break Trump’s reelection bid.
Trump and his top aides were quick to tout the GDP report as proof of the president’s successful economic agenda.
“President Trump’s policies are rebuilding the economy,” said Larry KudlowLawrence (Larry) Alan KudlowMORE, director of the National Economic Council, in an interview with CNBC’s “Squawk on the Street.”
“It’s a blowout number,” Kudlow said. “The prosperity cycle we’re in is gaining momentum, not losing it.”
The White House Council of Economic Advisers projected the economy will grow by 3 percent this year, powered by corporate tax cuts enacted by Trump in 2017.
But there are obstacles beneath Friday’s headline numbers that economists say could foretell the long-expected slowdown.
Personal consumption spending grew just 1.2 percent in the first quarter, following increases of 2.5 percent, 3.5 percent and 3.8 percent in the three preceding quarters.
Private nonresidential investment, an indicator of business expansion, also slowed to 2.7 percent.
Jason FurmanJason FurmanUS economy grew at 3.2 percent in first quarter, exceeding expectations The Hill’s Morning Report – Dems contemplate big election and court reforms On The Money: Trump presses GM, union to start talks over closed plant | Trump renews call to cut arts, PBS funding | Alan Krueger, former Obama economic adviser, dies at 58 | Americans expected to bet .5B on March Madness MORE, who chaired the Council of Economic Advisers under former President Obama, drew attention to final sales to private domestic purchasers, which excludes sectors such as government spending, inventory building and exports.
That metric rose just 1.3 percent in the first quarter, which Furman called a red flag for future growth.
“The underlying trend of consumption and investment is weakening,” Furman tweeted.
Diane Swonk, who is chief economist at Grant Thornton, said that more than half of first quarter GDP growth came from volatile trade-related metrics while the “underlying momentum in the domestic economy was particularly weak.”
“This is one of the weakest 3% growth quarters I have ever seen,” Swonk wrote in a research note. “Our forecast holds for a slowdown in 2019.”