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The second-quarter surge shows that the US economy is "on track" for four or five years of sustained annual growth of 3%, said Treasury Secretary Steven Mnuchin – a rosy prospect disagrees with that of many economists "We can project only a few years into the future, but I think we have been on this path for several years," said Mnuchin on "Fox News Sunday" as President Donald Trump. The economic team has been deployed in the morning talk shows to encourage the economy.
Photographer: Darryl Dyck / Bloomberg
The US economy has accelerated in the second quarter to the fastest pace since 2014, the government announced Friday, allowing Trump to tie the increase to its economic policies, including tax reform since the Reagan era and pressure for deregulation
However, the second quarter may prove to be as beneficial to the world's largest economy, and few Economists expect to reach the president's goal of sustained growth of 3%.
Long Expansion
The US expansion, which dates back to nine years, is expected to weaken as the momentum of the 2017 tax cuts fades, that companies fall back to foreign tariffs or the strength of the dollar. still raise interest rates. White House economic director Larry Kudlow said on CNN that the president "deserves the round of victory," adding that faster economic growth could continue for "a bunch" of years.
Mnuchin said that Trump respects the independence of the Fed, despite recent criticism of the president against the central bank for rising interest rates.
In fact, Mnuchin said it was responsible for the Fed to raise its rates because the economy is growing faster and inflation is rising.
Managing Inflation
"The Fed has targeted 2% inflation, and obviously with 2% inflation, we must have interest rates at least slightly higher to manage" , he said. In the second quarter, gross domestic product was boosted by consumer spending, business investment and the decline in the trade deficit. However, as the effects diminish, economists expect the pace to slow, with forecasts forecasting growth of about 3% this year before dropping to 1.8% in 2020. [19659008] The International Monetary Fund predicts growth of 2.9% in 2018 and 2.7% next year.
Although tax reforms and tax cuts help stimulate activity, it is unlikely that the strength of consumer spending in the second quarter will continue in the second half of the year, said Carl Riccadonna. Tim Mahedy, economists at Bloomberg. ]
"The strength of the dollar will slow exports, and importers will adjust supply lines by expanding the trade balance," they wrote. "In addition, residential investment seems to remain weak, partly because of last year's tax reform, and consumer spending will slow in the second half as the Fed continues to remove the measures from # 39; accommodation ".
The goal is a sustained GDP growth of 3%, which would far exceed the 2.3% average of the expansion started in July 2009, as well as the longer-term anticipation Fed term of 1.8%
. In the late 1990s, sustained growth of more than 3% was observed when GDP was overshadowed by a technology-induced productivity boom under Bill Clinton's presidency.
Trump predicted Friday that future trade deals would spur its expansion as it pursues an aggressive trading agenda that includes tariffs on steel and aluminum and a threat of customs duties on 500 billion dollars of Chinese imports. Many economists and badysts are waiting for an adverse impact if US actions trigger a global rise in protectionism
Trump and European Commission President Jean-Claude Juncker agreed last week to negotiate tariff barriers to transatlantic trade. While net exports contributed 1.06 percentage points to growth in the second quarter, the largest since 2013, the boost is probably temporary. The figures reflected a 9.3% increase in shipments abroad, stimulated in part by a surge in soybean shipments over China's retaliatory tariffs.
Few badysts rely on this component to continue to face a strong dollar and tariffs proposed or already implemented. At the same time, sustained domestic demand by households and businesses will lead to a recovery in imports, which could lead to a worsening of the trade deficit
– With the help of Ben Brody, Mark Niquette and Simon Kennedy [19659024]
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