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The US economy experienced strong annual growth of 3.5% in the third quarter, reinforcing the republican assertion that President Trump would preside over a boom, there were only 11 days left before the congressional elections.
Growth fell from 4.2% in the second quarter, but the economy posted its best consecutive quarter in four years – thanks to free spending by consumers and the federal government – and is within reach of the annual growth of 3% of the Trump Government. target.
"In spite of all that has been said about the [stock] the economy is doing pretty well, "said Ethan Harris, head of global economics at Bank of America Merrill Lynch. "The story here is a double dose of caffeine resulting from tax cuts and spending increases."
Vice President Pence touted Friday growth of 3.5%, writing on Twitter that, according to Trump, "the US economy is making a REAL COMEBACK after nearly a decade of weak growth."
[U.S. stocks skid deeper on tech sell-off]
Strong growth in total growth limited a volatile week on Wall Street, where the Dow Jones Industrial Average yielded all of its gains for the year. The report released Friday by the Commerce Department also issued a mixed assessment of the prospects for the president to provide a lasting period of improvement in economic performance and suggested that rising interest rates would begin to take hold. make you feel.
"The details of the growth were not as impressive as the 3.5%," said Jim O'Sullivan, chief US economist for High Frequency Economics, in an email.
The administration announced the reduction of corporate tax last year, which prompted companies to buy new machines, computers and factories. Still, the obvious gains earlier this year seem to fade, the report showed.
Business investment rose 0.8% in the quarter, following a gain of 8.7% in the previous three months. Spending on new structures decreased 7.9%, after increasing 14.5% in the previous period.
"It probably tells us that growth in the fourth quarter will be a little slower," said Ben Ayers, chief economist at Nationwide Insurance.
Another major disadvantage is that trade undermines the strength of the economy ($ 20.7 trillion), with imports outstripping exports more and more, the report said. The president has made the reduction of the trade deficit a key goal, but has not yet made progress after 21 months in office.
Since January, Trump has reduced tariffs on foreign-made solar panels, washing machines and industrial metals, as well as nearly half of the $ 505 billion worth of products imported each year by states. United States from China.
His threats of additional tariffs on Chinese products may have prompted US companies to increase their imports to exceed rising prices, economists said.
Third quarter results fall short of the expectations of the president, who promised in July that the third quarter figure would be "much higher" than the 4.2% of the second quarter.
Shortly after taking office in 2017, the president promised a "return to annual economic growth of 4%," a brand that the United States has not achieved since 2000. But officials of the Administration such as the Treasury Secretary, Steven Mnuchin, have recently described 3% years a year. growth as an objective.
Although the economic report is good news for the president, it will likely only provide a limited political boost to Republicans, according to Matt McDonald, a partner at Hamilton Place Strategies, who worked as a home communications assistant. White for President George W. Bush.
"What is difficult for the administration is to link the low unemployment rate and the vigor of the economy to all the actions undertaken, such as the reduction of taxes," he said. he declares.
Last month, voters said Trump's tax cuts favored "big business and the wealthy" over "middle-class families" in an internal survey by Bloomberg News of the Republicans.
Persistently volatile financial markets could also undermine voters' sense of well-being. The Dow fell more than 296 points on Friday, continuing a slide that has brought back more than 2,100 benchmark points since Oct. 3.
Last month, investors lost more than 6% on the Dow and more than 10% with the Nasdaq index, rich in technology.
Market prospects are clouded by the Federal Reserve's plan to continue raising interest rates. The country's central bank has raised short-term rates three times this year to reach a range of 2 to 2.25% and is expected to do so again next month.
This drives up borrowing costs, which pinches the housing industry. Residential investment fell 4%, its third consecutive negative quarter.
With mortgage rates reaching 5%, new single-detached home sales fell 5.5% last month to a seasonally adjusted annual rate of 553,000, the fourth consecutive monthly decline, according to a government report on Thursday.
Sales volume in September was 13% lower than the previous year and the previous three months were also revised downward.
The Commerce GDP report, a preliminary estimate that will be revised twice in the coming weeks, appears when Trump again criticized Fed President Jerome H. Powell this week for raising interest rates, calling on the country's central bank the "biggest risk" for further growth.
With the unemployment rate at its lowest level since 1969, the Fed raised interest rates to prevent annual inflation from taking off. Prices are rising by 2% per year, according to the Fed's preferred gauge.
Nevertheless, Friday's economic news was better than expected by most analysts. Strong consumer spending and government spending spurred growth from July to September. The accumulation of stocks of goods also helped, suggesting a potential weakness if firms reduced production while liquidating their backlog.
"The economy continues to dramatically exceed its potential, which is quite remarkable," said economist Michael Strain of the American Enterprise Institute, citing an expansion that has not seen any change. recession since 2009.
Friday's report showed little sign of a lasting improvement in the economic situation. The fastest way to achieve a higher standard of living is for workers, farmers and factories in the country to produce more production with the same resources. But the United States has struggled for years to achieve higher productivity.
"Based on today's figures, we estimate that non-farm business productivity increased by 1.6% per year in the last quarter and only 1.1% over the previous year," writes JPMorgan Chase economist Michael Feroli in a note to customers. "This figure is in the middle of the sad rut in which he has been for a decade."
The latest economic report card, prepared by officials from the Department of Commerce and Career, closed a week of mixed economic news. On Thursday, the Census Bureau announced that new orders for durable goods rose 0.8%, better than expected, in September. And the labor market remained strong, with new jobless claims remaining at a record low for half a century, according to a separate report from the Labor Department.
In the run-up to the November 6 legislative elections, Republicans will celebrate the vigorous growth of the economy – while ignoring economists' forecasts that growth will slow next year – and Democrats will complain that earnings are not shared equally.
"The best is yet to come," said Kevin Brady (R-Tex.), Chair of the House Ways and Means Committee. "I think growth will be even stronger in the long run."
At the same time, the left-wing Center for American Progress said "workers and middle-class workers" have yet to see any benefit from Trump's tax cuts. The decline in corporate tax revenues is causing skyrocketing deficits and fueling Republican calls for cuts in health insurance and social security, the group said in an analysis of GDP results.
Only one other important economic overview will be released before mid-term: the monthly growth figures for employment and unemployment on November 2.
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