Trump got a dynamite GDP number last quarter — and early signs point to the next one being even better
- President Donald Trump took a victory lap Friday after second-quarter gross-domestic-product growth came in at 4.1%, the strongest since the third quarter of 2014.
- Trump said the GDP reading proved that his policies were working and that the country was on track to fulfill his promise of sustained 4% annual GDP growth.
- Many economists doubted the strong growth would continue, pointing to transitory factors that help boost the second-quarter number.
- But early estimates for third-quarter GDP growth look potentially even stronger.
President Donald Trump took a victory lap Friday after the release of a strong second-quarter gross-domestic-product number, and early signs point to the celebration continuing in the third quarter.
The second-quarter reading of 4.1% GDP growth was the highest since 2014, and both the White House and the GOP pointed to it as evidence that Trump’s policies were boosting the US economy. The president also touted the number as proof the economy could achieve his promise of annual GDP growth of over 4%, a claim about which almost all economists were skeptical.
While Friday’s release was substantial, many economists pointed to short-term factors that could fade in future quarters — like a huge boost in soybean exports ahead of Trump’s tariffs, or fiscal stimulus from the federal budget.
But there are early indications that Trump may have reason to boast about the third quarter too.
The Atlanta Federal Reserve’s GDPNow model, which uses available economic data to predict the current quarter’s GDP growth, stood at 5% on Thursday, up slightly from an initial estimate of 4.7%.
The model has a strong track record. But GDPNow isn’t perfect, especially so early in a quarter, and it is subject to updates as more data emerges.
Neil Dutta, the head of US economics at the research firm Renaissance Macro, pointed to data suggesting that the strong initial reading from the Atlanta Fed is likely to hold up.
While Dutta said it was “unlikely that we’ll get 5% for the third quarter,” the economist noted that the average move for the GDPNow reading over the course of a quarter since its inception was a drop of 0.6 percentage points. Based on the initial estimate, that would put the final third-quarter GDPNow estimate at 4.1%, which would be on par with the second quarter and one of the highest postrecession readings.
Per Dutta’s breakdown, the biggest downward move in the GDPNow’s estimate over the course of a quarter was 2.2 percentage points, which would still leave third-quarter GDP growth at a respectable 2.5%.
On the other end, the largest upward move was 1.5 percentage points, so an equal move from the initial estimate would put the third quarter at 6.2%. That would be the highest quarterly GDP print since the third quarter of 2003.
“Anything in that range is consistent with strong, above-trend growth and would be a reasonably solid number coming after a 4% GDP print,” Dutta said.
The 4.1% GDP reading in the second quarter was above the Atlanta Fed’s final estimate of 3.8%.
Trump, for his part, is already banking on a big third-quarter reading, set to be released October 26.
“I happen to think we’re going to do extraordinarily well in our next report,” Trump said at a press conference Friday.
Read the full article from it’s original source: http://uk.businessinsider.com/trump-gdp-growth-q3-third-quarter-strong-2018-8