The US economy recorded an impressive annual rate growth of 4.1%. This is the fastest growth rate recorded over the last four years. The data was announced by the Commerce Department on Friday. This is seen as a big win for Trump and his administration after the White House pushed through a $1.5 trillion tax cut early this year in an effort to accelerate economic growth. The new numbers also come just 100 days before the midterm elections in the US.
Prior to the announcement, President Trump had sent tweets teasing that he was looking forward to the impressive numbers. This was a bit unusual because Presidents have always refrained from commenting on market-sensitive government releases ahead of the official release. Trump said in Illinois before the numbers came out that he was hoping for at least 4% growth. It’s very likely that the president had prior information.
Trump expressed his satisfaction with the figures in a press conference held on Friday. He said that the growth was “amazing” and that this was in fact not a one-time thing but a sustainable growth path that will improve even more in the near future. Trump also expressed confidence that the next report from the Commerce Department expected to come shortly before the midterms will be “outstanding.” Trump called the recent growth “an economic turnaround of historical proportions” adding that the US is now once again the “economic envy” of the entire world.
However, economists remain very skeptical on the sustainability of the current growth rate. This mini-boom so far according to them has benefitted the wealthiest Americans more than the average citizens. Nonetheless, it’s still a big leap compared to the last few years. The last time the US economy grew faster than this was in 2014 during the Obama administration. At the time, the average annual growth managed to hit 5.2%.
The report by the Commerce Department showed that the current growth is largely driven by increased consumer spending, business investments, and increased exports. According to the report, consumer spending in the period under review was up by 4%. This was a significant increase to the 0.5 % recorded at the start of the year. Business investments also rose by 7.3%.
The biggest challenge for the Trump administration will be to maintain this growth all through the year. In 2017, for instance, the average annual growth at the end of the year was just 2.3%. In addition to this, the US economy hasn’t grown beyond the 3% mark for the last 14 years. Despite the growth, the report shows that wage growth remains very lackluster. This trend has remained the same since the recession and it may take even more time to be fixed.
Government revenues have also dropped after Trump’s tax cuts with the federal budget deficit expected to hit $1 trillion by 2020. Experts think that it’s still too early to fully assess the wide-ranging benefits of the tax cuts implemented earlier this year.