Trump and his allies have been loudly bragging about the second quarterly GDP growth rate of 4.1%. It is quite possible that a growth rate of this sort may be maintained for another quarter or so, given the large fiscal stimulus put in place at the beginning of the year. How curious it is that that coincided with the peak of the US stock market, at least as measured by the Dow.
However, this is seriously overblown for the simplest of reasons: the rate of inflation is rising. It has now gotten to rising at a 2.9% rate while nominal wages are rising at a 2.8%. So real wages have declined by a 0.1% rate. Real wages rose throughout nearly all of the Obama presidency, except for a couple of quarters. But if one pays attention to Trump and his allies, one would have no idea of this development. Needless to say, as the price increases from the trade war kick in, this situation is not likely to improve.
Barkley Rosser
Does anyone have any educated commentary on the Missouri Prop A thing?
Define “educated commentary.” I live in St. Louis.
I expect growth to be revised down in the 2nd quarter over the years closer to 3%. Looks like 1% GDP in the 3rd. I think job growth slowdown has begun in July, but the lags carried it over.
Bert:
Thank you.
Bert,
Why is that? I see no reason for revision to move one way or the other. I also think there is a good chance that nominal growth will mostly hold up third quarter, although there are some signs of possible slowing in some quarters. But I suspect that inflation might go up as the trade war tariffs start to seriously bite, although that might be offset by a stalling out of energy price increases, which were important in the inflation acceleration ni second quarter. But then, oil prices have been going up in the last few days thanks to Trump’s sanctions against Iran. Still too soon to see how all this will play out, although I do not expect to see any substantial increase in real wages third quarter, even if they return to the positive growth that had been going on for some time.
Barkley, I think you got feedback issues. Growth accelerated in the 2nd quarter because 1st quarter growth was weak. It was also bloated by Harvey based spending which likewise made the 1st quarter look stronger than it was. Likewise, that spending is not going to repeat again. Period. When growth bloats like that, it is because hedonic adjustment bias.
Don’t post lazy and understand how revisions work. The fact core sales are struggling this year tells me debt servicing is reaching high levels in certain, important debt segments. The shadow banking system that inflated the Silicon Valley bubble is the real threat. We are likely in the lying stage of earnings and real profit. My guess it is shrinking.
I may like you yet . . .
Bert,
Oh, I am lazy and do not know how revisions work? Really?
Is “Harvey spending” invisible? This is not a term I am familiar with.
As it is, some of the acceleration last quarter may have been bounceback from first quarter, and it will decelerate. But it might not this quarter. There is a lot of momentum in this growth, although the trade war may be providing the biggest threat.
Some of the things you mention are not partidcularly threats right now. There is no evidence of problems in retail sales, nor with consumers managing their debt servicing, nor with some supposed shadow banking in Silicon Valley, much less a bubble there.