Thread: Friday's lousy GDP report actually had some really good news for the Trump economy

Friday's lousy GDP report actually had some really good news for the Trump economy

GDP for the first quarter grew just 0.7 percent, worse than Wall Street economists' expectations.
Business investment, however, jumped 9.4 percent, the most in years.
Economist Joseph LaVorgna said the investment data showed "animal spirits" rising in business.

Jeff Cox
1 Hour Ago CNBC.com

Within Friday's pedestrian reading on first-quarter growth came some real evidence that money is being put to work and could trigger growth.

GDP started the year by advancing 0.7 percent, a weak reading that was below consensus of 1.2 percent but actually better than some of the more pessimistic forecasts coming out of Wall Street in recent days.

Within the numbers, though, there was an interesting story that gives hope for better days.

Private investment, which has languished through much of the recovery, spiked to start the year. In doing so, it provided one of the first signs that the soft data of powerful sentiment readings from businesses, investors and consumers were translating into some tangible action in hard data.

"We're certainly seeing an improvement in business investment," said Joseph LaVorgna, chief U.S. economist at Deutsche Bank. "That does suggest that some of the animal spirits that are showing up in softer data are actually coming through in these GDP numbers."

The most-watched indicator regarding business spending is nonresidential private investment, a capital expenditures barometer that surged 9.4 percent for the first three months. Investment in structures jumped 22.1 percent and equipment rose a similarly strong 9.1 percent, according to figures from the Bureau of Economic Analysis.

An employee inspects a component for hybrid electric vehicle motors at the Toshiba International manufacturing facility in Houston, Texas.

An employee inspects a component for hybrid electric vehicle motors at the Toshiba International manufacturing facility in Houston, Texas.

The capex number was the best going back to the fourth quarter of 2013.

Economists attributed the investment surge to spending by energy companies in equipment and structures.

"The guts within the GDP report were stronger than the headline implies," Michelle Meyer, U.S. economist at Bank of America Merrill Lynch, said in a note. Meyer characterized investment as "quite robust," though she noted that a 13.7 percent gain in residential investment could have come due to warmer-than expected-weather, particularly in February.

Meyer said she expects more robust growth through the rest of the year, buttressing forecasts from Goldman Sachs earlier this week that GDP in the next two quarters should average around 2.7 percent.

There were additional signs of a swing in activity.

The Employment Cost Index, believed to be a favorite indicator for Fed Chair Janet Yellen, showed a quarterly increase of 0.8 percent and an annualized gain of 2.4 percent, significantly higher than the 1.9 percent gain of a year ago.

The central bank is looking for signs of inflation both as a sign of economic activity and a tightening labor market.

Inflation indicators overall for the month were mixed. Personal consumption expenditures increased just 0.3 percent for the quarter. But the PCE price index rose 2.4 percent, or 2.0 percent excluding food and energy, about in line with Fed inflation targets.

Those trends come amid stock market averages that are lingering around all-time highs, and a string of new records set for business deal activity. Volume for cross-border mergers and acquisitions, issuance for investment-grade and high-yield debt, and secondary share issuance for companies that recently went public are all at historical levels, according to data from Thomson Reuters.

http://www.cnbc.com/2017/04/28/the-l...p-economy.html

Latest GDP report is an economic wake-up call

By Jennifer Rubin
April 28 at 12:30 PM

The U.S. gross domestic product grew at a measly 0.7 percent in the first quarter. The Post reports: “Most economists had been expecting a lackluster growth report for the first quarter, with analysts surveyed by Reuters predicting the figure would be around 1.2 percent. Yet the report still highlights the challenge that this administration — which marks [President] Trump’s first 100 days in office on Saturday — will face trying to meet its target rate of 3 percent economic growth.” That’s putting it mildly. But this does come with the appropriate caution that “weaker growth is partly due to persistent measurement issues, which have caused the government to underestimate growth in the first quarter for many years — and reflected poorly on other presidents in their first quarter in office.”

Now, we don’t expect Trump to take “credit” for the GDP figure, as he did with the strong jobs figure for February (but not the lousy March numbers). He, frankly, is responsible for none of it. This was the economy he inherited — sluggish growth with modest employment gains. It’s not Trump’s dystopia, but neither is it cause for celebration. Perhaps now pundits will cease to believe that Trump has awoken some “animal spirits” in the economy (we prefer hard data to psychobabble) or to assume that the stock market and economic growth go hand in hand.

The figure should add a measure of reality to the administration’s calculations and to punditry celebrating supposedly high confidence. As the Wall Street Journal reports:

The main factor behind the latest slowdown: Sluggish consumer spending. Household outlays grew by the smallest amount since late 2009, as Americans reduced purchases of big-ticket items like cars and spent less on home heating during the warm winter. Rising inflation also cut into Americans’ paychecks.

The slowdown contrasted with surveys showing surging confidence among Americans and the booming stock market. And it offset other positive developments, including a pickup in business investment and a rise in U.S. exports.

Anemic consumer spending also raises doubts as how a tax plan so heavily tilted toward investors, corporations and the very rich would help the economy all that much. (“Consumer spending grew at a 0.3% rate, the smallest increase since the fourth quarter of 2009. That largely reflected a drop in purchases of durable goods–big-ticket items such as cars and refrigerators. Spending on services grew at the slowest pace in four years, partly reflecting lower utility bills.”) Moreover, Trump’s slash-and-burn spending approach seems ill-suited to our current situation. (“Government spending fell by a 1.7% rate. One possible factor: A three-month hiring freeze imposed by the Trump administration. State and local government spending also fell.”)

The figures should remind lawmakers, pundits and activists that the trade deficit does not mean loss of jobs or economic growth. To the contrary, “new strength in the global economy pushed up demand for U.S. exports, which grew at an annual rate of 5.8%. That helped narrow the trade deficit.”

Trump’s agenda and the GOP’s agenda remain strangely disconnected from present economic conditions. Putting more money in the hands of consumers rather than stoking business investment (which is already high — a “9.4% pace, the biggest jump since late 2013”) should be a priority. A policy of middle- and lower-class tax cuts (possibly a payroll tax cut), infrastructure spending and an investment in R&D, education and worker training would seem to be more appropriate. Moreover, it would behoove us to increase legal immigration — which brings more consumers, younger workers and more entrepreneurs. Come to think of it, aside from cutting back on some regulations, nothing Trump or the GOP is doing or attempting to do seems aimed at getting us out of the economic doldrums.

https://www.washingtonpost.com/blogs...=.7d0f56d98955

Our economy is in a self-imposed vice, paralyzed by decades of destructive government policies on immigration, tax, trade, drugs and energy that have nearly destroyed it.

The latest bad economic news isn’t Trump’s fault, but he has made it his problem

By Max Ehrenfreund
April 28 at 1:14 PM

The economy grew slowly last quarter, according to a report published Friday, the first official estimate of growth under President Trump. (Evan Vucci/AP)

President Trump came into office promising to make the economy great again — or at least make it grow at rates the United States hasn't enjoyed for decades.

On Friday, he got a taste of just how far he has to go.

The country's gross domestic product, a broad measure of economic growth, grew by a paltry 0.7 percent in the first quarter of 2017, slower than the quarter before it and far from what Trump said he would and could deliver for the American people. During the campaign, he cited figures as high as 6 percent.

Now, that anemic quarter isn't Trump's fault — there's little if anything any president can do in his opening months that would have an instant effect on GDP growth — and it's not even as bad as it sounds.

Despite the disappointing figures in Friday's report, experts believe the economy is doing reasonably well. Official estimates of economic activity in the first quarter often give the impression of a weak economy, in part because of the weather. A winter storm can halt a construction project, or keep shoppers off the street. By contrast, unusually warm weather can discourage consumers from spending on wintry items.

The bad news for Trump is that while the economy may be sound, it's not roaring, and a host of longer-term factors — which Trump didn't cause but also can't fix — mean it's unlikely to hit rocket growth any time soon.

One factor is the age of the labor force. Although more Americans have gone back to work since the financial crisis eight years ago, the number of workers who are available has been declining as baby boomers retire. That trend limits how much the economy can produce.

Trump's allies say he can restore the economy to its level under President Ronald Reagan. After an initial recession during his administration, GDP skyrocketed 7.3 percent in 1984, and continued to expand rapidly for the rest of his term.

Yet Reagan had advantages that Trump will not. When Reagan was in office, the labor force was expanding rapidly as women went to work in the formal sector. Meanwhile, the economy was on the verge of a technological boom.

“The evidence shows clearly that no feasible tax reform in this country will raise economic growth to 3 percent on a sustained basis,” said Douglas Elmendorf, a former director of the Congressional Budget Office, in a recent interview with The Washington Post.

Trump's task is complicated by the Federal Reserve, which after nearly a decade of attempting to stimulate the economy, is now trying to make sure it doesn't run too hot. At their meeting last month, Fed officials said the economy was performing according to expectations and that they planned additional hikes in interest rates if the current trend continued. Investors are expecting another increase in June.

And while every president hopes for a roaring economy, under the tax outline Trump put out this week, he's officially betting the country's finances on it.

The White House is counting on economic growth to be able to cut taxes without adding to the national debt.

Trump aims to reduce taxes sharply, especially on businesses, but his advisers say that there is no need to bring down government spending at the same time. Instead, they argue, the cuts will stimulate rapid economic growth, allowing the government to go on collecting the same amount of money in taxes despite reduced rates.

If that growth does not materialize, then the government will have to borrow more to make up for the forgone revenue. And sooner or later, that bill comes due.

In short, if Trump succeeds is passing his tax plan but can't deliver the economy he promised, it won't just be his problem. It will be a problem for his successors, and for the next generation of taxpayers too.

https://www.washingtonpost.com/news/...=.b1e41b43f550

The bad news for Trump is that while the economy may be sound, it's not roaring, and a host of longer-term factors — which Trump didn't cause but also can't fix — mean it's unlikely to hit rocket growth any time soon.

One factor is the age of the labor force. Although more Americans have gone back to work since the financial crisis eight years ago, the number of workers who are available has been declining as baby boomers retire. That trend limits how much the economy can produce.

That's a joke. Our older Americans are the back-bone of this nation. These older Americans who have lost their jobs because of massive immigration, bad trade deals and outrageous taxation, can work circles around this younger generation. Our younger generation hasn't been trained, educated or worked to do anything. So the only reason those older Americans who are old enough for early retirement or have enough aches and pains they can qualify for at least a partial disability payment are doing so because they lost their jobs and can't find another one, NOT because they can't produce for the economy. You tap that "older workforce" and pay it properly, and they'll out produce every country on the planet, because they know how to do that, something they've known all their lives and our younger generation has yet to learn.

I mean look at Donald Trump. He runs circles around his younger staff and every young member of Congress. Even his much younger grown kids can't keep up with him.

“The evidence shows clearly that no feasible tax reform in this country will raise economic growth to 3 percent on a sustained basis,” said Douglas Elmendorf, a former director of the Congressional Budget Office, in a recent interview with The Washington Post.

Not by itself, but when you are fixing bad trade deals, curbing this outrageous counter-productive massive immigration and regulations, and spurring base industries like steel, aluminum, oil, coal, natural gas, alternative energy, lumber, auto and others at the same time, we could have 10% GDP growth and enjoy both trade and budget surpluses with these tax cuts.

The White House is counting on economic growth to be able to cut taxes without adding to the national debt.

Trump aims to reduce taxes sharply, especially on businesses, but his advisers say that there is no need to bring down government spending at the same time. Instead, they argue, the cuts will stimulate rapid economic growth, allowing the government to go on collecting the same amount of money in taxes despite reduced rates.

The White House is counting on much more than new taxes from economic growth, it's counting on increased wealth and prosperity for the American People from the JOBS, JOBS, JOBS generated by the economic growth that reduces poverty and other public assistance programs that reduce welfare and "safety net" spending significantly, that alone will pays for the tax cuts, the rest is gravy.

The Congressional Budget Office may be "bi-partisan", but they're all Democrats, you can tell by the way they do the math, what they leave out, how they project and forecast, and of course what they say in their reports. Democrats do not understand how our economy works when it does well, they only know how it works when it's failing because all they know to do is raise taxes and prop it up with government spending. Republicans, Real Republicans, know that to keep it from failing you control immigration to control the numbers of poverty, grow the manufacturing base to grow the good jobs that also create 5 other jobs in the economy from creating just 1 manufacturing job, and then you have this massive job growth from protecting our trade that raises wages, prosperity, savings, consumption and THAT is what grows the economy in a meaningful way that also reduces government spending, deficits and debt.

It's that's simple. Trump's got this. He was educated and worked at a time when we had an American Economy, he knows first-hand as I do, the difference between the United States and Singapore.