Trump's economy "a bit short" of the 3% growth target: the

FILE PHOTO: US President Donald Trump beckons to Jerome Powell, his presidential candidate for the US Federal Reserve at the White House in Washington on November 2, 2017. REUTERS / Carlos Barria / File Photo

February 22, 2019

By Howard Schneider

WASHINGTON (Reuters) – The Trump administration will fall "slightly short of" its annual growth target of 3 percent of gross domestic product by 2018, the Federal Reserve said Friday in a report proposing an economic scorecard for the first full year of President Donald Trump's term.

The verdict: mixed, and maybe going in the wrong direction. By the end of the year, the impact of tax cuts and other policies was fading, trade was hurting growth, and the federal deficit was larger.

On the upside, employment growth remained strong.

Although the year's growth was "solid," the Fed said, gross domestic product "has slightly exceeded 3 percent for the year as a whole," fearing the pace that White House officials have set as touchstone the success of the president's policies.

Earlier this month, Larry Kudlow, the White House's economic adviser, said growth would be 3% in 2018 and at least equivalent for 2019 – a forecast the Fed does not share either.

The Fed said that 2018 would be "a significant recovery" in recent years, but has presented a set of adverse factors, including a decline in business and consumer spending at the end of the year, which could continue in 2019 .

COMPLETE THE NIL

The Fed's estimate of last year's growth fills the gap left by the recent government shutdown, which delayed the release of early estimates of fourth quarter and year 2018 growth by the Bureau of Economic Analysis. .

This official GDP figure is now due next week.

In the meantime, however, the Fed had to report back to Congress under a law requiring the president of the central bank to visit Capitol Hill twice a year to inform lawmakers.

This appearance will take place next week. In an accompanying report released in advance, the Fed used its own sophisticated models to release a net profit for 2018.

Trump took office in January 2017 and by the end of this year had put in place a range of economic policies, including a $ 1.5 trillion tax cut, an increase in public spending and a an effort to reorganize the global trading system in the United States. favor.

White House officials said it would free up spending and investment, ease the US trade deficit, and improve the government's balance sheet by generating enough additional revenue to offset tax cuts.

And some were true at first, according to the Fed, although the momentum seems to be weakening.

The strength of the labor market is undeniable: around 220,000 jobs were created each month on average during the second half of the year, workers who have been put aside have returned to work and the unemployment rate has decreased "in all countries. large demographic groups ".

However, at the end of the year, consumers fell and business investment growth at the beginning of the year was "moderate," while business spending plans, business confidence, and expected benefits meant an even more fragile investment climate.

International trade, after a "strong performance" that boosted GDP at the beginning of the year, could become a net drag on the economy in 2018, after the fall in exports towards the end of the year and the "growth real imports which seems to have recovered "imposition of various tariffs.

The federal deficit widened to 3.75% of GDP in fiscal 2018, which ended in October, compared with 3.4% the previous year.

(Report by Howard Schneider, edited by Andrea Ricci)