President Donald Trump is spiking the football again after a new report shows GDP for the first quarter of 2019 is higher than predicted, but economics experts are already warning that it’s not exactly something to cheer about.
Despite a crippling government shutdown and several trade wars, the economy posted a 3.2 percent GDP to start 2019, which resulted in Trump taking to Twitter to brag.
Just out: Real GDP for First Quarter grew 3.2% at an annual rate. This is far above expectations or projections. Importantly, inflation VERY LOW. MAKE AMERICA GREAT AGAIN!
— Donald J. Trump (@realDonaldTrump) April 26, 2019
However, economists and economic analysts had bad news for Trump and America that not all the news is great and that the second quarter will likely play out much differently.
POLITICO Chief Economic Correspondent Ben White observed that consumer spending dropped and that other factors that contributed to the higher GDP could reverse.
Don’t want to be Debbie Downer but the rate of spending by consumers and businesses fell and contributions from trade and inventories to the top line may not be repeated and could reverse. https://t.co/rDxXos3Dp1
— Ben White (@morningmoneyben) April 26, 2019
Grant Thornton Chief Economist Diane Swonk, who advises the Federal Reserve, noted that a lot of gains were because of aircraft orders and wrote that over half of the GDP figure was the result of high inventory and slower trade.
Over half the whopping 3.2% GDP figure due to surge in inventories and slower trade. Imports fell. Consumer spending and business investment slowed to a crawl. Federal government flatlined in wake of gov shutdown.
— Diane Swonk (@DianeSwonk) April 26, 2019
A 31% surge in aircraft orders also contributed to the gains. That begs the question of when the cancelations and production lost to problems with the Boeing 737 Max will show up.
— Diane Swonk (@DianeSwonk) April 25, 2019
Nobel Prize-winning economist Paul Krugman called the rate a mere “blip.”
Unexpectedly high GDP number, but it looks mostly like an inventory blip. These things have happened before — for example, in 4th quarter 2009, which came in at 4.5% growth. And yes, I called it a blip at the time https://t.co/SRyqWtjqYx
— Paul Krugman (@paulkrugman) April 26, 2019
Washington Post economics correspondent Heather Long pointed out that certain factors pushed the number past expectations but warned that other aspects of the report indicate that the economy is fading.
BREAKING: US #economy grew at a 3.2% (annualized) pace in Q1 2019, best since 2015 and smashing estimates of 2.3%. Higher inventories and a smaller trade deficit helped push the number up, factors that aren’t likely to last.
Q1 18: 2.2%
Q1 17: 1.8%
Q1 16: 1.5%
Q1 15: 3.3%— Heather Long (@byHeatherLong) April 26, 2019
The not-so-good news about Q1 GDP: Business investment is pretty lackluster.
Nonresidential fixed investment grew just 2.7%. White House keeps talking about a biz investment “boom,” but it appears to be fading.
Q1 18: 11.5%
Q2 18: 8.7%
Q3 18: 2.5%
Q4 18: 5.4%
Q1 19: 2.7% pic.twitter.com/M5VKnmnNSo— Heather Long (@byHeatherLong) April 26, 2019
Jason Furman, former Chairman of President Obama’s Council of Economic Advisers, warned that underlying data shows the economy is slowing, a sign that a recession is on the way.
First quarter GDP is 3.2% but the underlying data is much weaker and is consistent with a slowing economy.
— Jason Furman (@jasonfurman) April 26, 2019
And the Washington Post’s Catherine Rampell, who is also an economic commentator for CNN, pointed out that a much lower GDP is predicted for next quarter.
.@EconomicsRisk tracking estimate for GDP pic.twitter.com/UTMrc8n43l
— Catherine Rampell (@crampell) April 26, 2019
And you can bet that Trump will not be bragging about a much lower GDP. He certainly won’t take responsibility for it. As Americans across the country suffer the consequences of his economic incompetence, he’ll blame anyone and anything but himself.
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