Via TalkingPointsMemo AP notes:
Private forecasters cautioned that the April-June pace is unsustainable because, they say, it stems from temporary factors, including a rush by exporters of soybeans and other products to get their shipments out before retaliatory tariffs took effect. They predicted the rest of the year is likely to see solid, but slower growth of around 3 percent. The transformation is also not as dramatic as Trump claims — and in many ways the 4.1 percent annualized growth during the second quarter is in line with an economic expansion that just entered its tenth year. During Barack Obama’s presidency, there were four quarters when annualized growth exceeded the level that Trump praised on Friday. And in 2015, full-year economic growth nearly reached the 3 percent level being targeted by the Trump administration this year when it hit 2.9 percent.
Is this “fake news” being peddled by those socialists at TPM? What do these private forecasters know anyway! Well AP does lead with what the White House wanted to emphasize:
President Donald Trump on Friday celebrated the release of new economic data, claiming the U.S. is now the “economic envy of the entire world.” Trump was responding to new growth numbers announced on Friday that show the U.S. economy surged in the April-June quarter to an annual growth rate of 4.1 percent — the fastest pace since 2014. “We’ve accomplished an economic turnaround of historic proportions,” Trump told reporters during hastily arranged remarks on the South Lawn of the White House, where he was joined by Vice President Mike Pence and flanked by members of his economic team. “Once again, we are the economic envy of the entire world,” Trump said, adding that “America is being respected again.”…Trump, who has repeatedly attacked the economic record of his predecessor’s administration, pledged during the 2016 campaign to double growth to 4 percent or better. And he has been tring to highlight economic gains ahead of the midterm elections. But Trump, ever the salesman, predicted even higher growth as he renegotiates the nation’s trade deals, saying, “We’re going to go a lot higher than these numbers.” And he insisted the economic numbers are “very sustainable” and not “a one-time shot.”
Now that’s telling it like Sean Hannity and Fox & Friends would do! OK – time to listen to an actual economist such as James Hamilton:
Growth in consumption, nonresidential fixed investment, and net exports helped produce the strong numbers. Higher oil prices stimulated a big boost in spending on mining exploration, shafts, and wells. That was one factor in higher investment spending; growing business confidence may have also played a role. Tax cuts likely contributed to the growth in both consumption and investment. Some of the export growth may have come in anticipation of coming tariffs. I count the contribution from exports as a soon-to-disappear plus, though it’s balanced by a big minus in inventory investment that’s also likely transient.
We’ll get back to the soybean boom which led to real exports growing by more than 9% per annum last quarter. While residential investment fell a wee bit, nonresidential fixed investment has been growing at a 9% per annum clip for the past two quarters. Is this due to temporary facts (see the Econobrowser comment section for more) or is it sustainable as Trump argued? We shall see but permit me to repeat what I said on this in the comment section:
Trump lies about everything. He correctly noted that real business fixed investment has been growing by 9% over the past two quarters but then we have not seen this for decades? Really? We had this rate of growth back over the 2011/2012 two year period. From 1995 to 2000, real business fixed investment grew by about 10% per year. We had double digit growth rates both during the 1976 to 1978 period and the 1964 to 1966 period. I guess it does not count if the President during these periods was a Democrat.
OK now that I got that out of my system, I want to turn to Trump’s argument that we can sustained high growth if we can get a large boost in net exports. Never mind the fact that the soybean boom will turn to a soybean bust now that China’s tariffs on our soybeans are in place. Of course there are other aspects to this stupid trade war but focusing on that may be missing the point that Menzie Chinn articulated last fall: