US growth jumped in the second quarter, surpassing 4% for the first time in four years, a performance hailed with triumph by Donald Trump.
From April to June, the expansion of Gross Domestic Product (GDP) reached 4.1% year-on-year, the highest rate since the last quarter of 2014.
“We are envying the rest of the world […] America is respected!” Said President Donald Trump, citing an “economic miracle” after the release of the Commerce Department’s first estimate on Friday.
“We have achieved a historic economic turnaround,” he added assuring that, in keeping with his election promises, the country was “on the right track to achieve the highest annual growth rate in 13 years.”
“We will achieve an annual growth of more than 3%, probably well above 3%,” said the president, adding that during the two previous presidencies, this expansion had capped at 1.8% on average . The Federal Reserve currently plans 2.8% for the whole of 2018.
An economy threatened by a protectionist policy
Many economists, however, believe that the economy will not be able to maintain this frantic pace. “Aided by the fiscal stimulus, the economy has enjoyed a strong first half, but as this support fades and monetary policy becomes more restrictive, we expect growth to slow marked from the middle of 2019, “said Paul Ashworth, chief economist for the United States at Capital Economics.
But for Donald Trump, “these numbers are very, very sustainable. It’s not an isolated shot.
Year-over-year, the value of goods and services produced in the United States exceeded for the first time in history $20 trillion.
“If growth continues like this, the size of the US economy will double in 10 years, faster than it would have been under Presidents Bush or Obama,” Trump told reporters. White House.
In the second quarter, the expansion of the world’s largest economy was driven by buoyant consumption, up 4%, its best figure since the end of 2014 as well.
The tax cuts, adopted by the Republicans at the end of 2017, seem to have finally boosted household spending. Americans mostly bought more durable goods (+ 9.3%), especially cars.
Another highlight of the quarter figures: exports climbed 9.3%, the highest in five years. This sharp rise appears as a side effect of trade tensions caused by the Trump administration in early spring with the imposition of taxes on imported steel and aluminum, particularly from China.
Before the Chinese replicate and impose taxes in July on US soybeans, foreign buyers seem to have anticipated and filled the silos.
Exports contributed 1.12 points to growth, the highest level in five years. “The trade deficit has dropped by more than $ 50 billion, a tremendous fall,” said Trump, who has launched a trade showdown with most of Washington’s trading partners.
On the corporate side, major beneficiaries of the tax reform, investments performed well, rising by 7.3%.
This dynamic activity should reinforce the Federal Reserve’s strategy of gradually raising interest rates in order to prevent overheating.
The Fed holds a monetary meeting Wednesday in a somewhat tense atmosphere as the tenant of the White House, breaking with the recent tradition of respect for independence of the Fed, did not hesitate to attack the monetary institution, accusing it of increasing the cost of money.
“I’m not happy” with the monetary policy of gradually raising interest rates, “but at the same time, I let them do what they think is best,” Trump said last week , also denouncing the rise of the dollar that can commercially cripple the United States.
The Fed’s next rate hikes are, however, only expected from September by the financial players.