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Trump got a dynamite GDP number last quarter — and early signs point to the next one being even better

Trump got a dynamite GDP number last quarter — and early signs point to the next one being even better

Trump got a dynamite GDP number last quarter — and early signs point to the next one being even better Bob Bryan Aug. 2, 2018, 8:39 PM 0 facebook linkedin twitter email print Reuters President Donald Trump took a victory lap Friday after second quarter GDP came in at 4.1%, the strongest since the third…


Trump got a dynamite GDP number last quarter — and early signs point to the next one being even better

trump thumbs upReuters

  • President Donald Trump took a victory lap Friday after second quarter GDP came in at 4.1%, the strongest since the third quarter of 2014.
  • Trump said the GDP reading proved that his policies were working and that the country was on track to fulfill his promise of sustained 4% annual GDP growth.
  • Many economists doubted the strong growth would continue, since transitory factors help boost the second quarter number.
  • But early estimates for third quarter GDP look potentially even stronger.

President Donald Trump took a victory lap Friday after the release of a strong second-quarter GDP number, and early signs point to the celebration continuing in the third quarter.

The 4.1% second-quarter reading was the highest since 2014, as both the White House and GOP pointed to the growth as proof that Trump’s policies were boosting the US economy. The president also touted the number as proof the economy could achieve his promise of annual GDP growth over 4%, a claim of which almost all economists were skeptical.

While Friday’s release was substantial, many economists pointed to short-term factors that could fade in future quarters — like a huge boost in soybean exports ahead of Trump’s tariffs and fiscal stimulus from the federal budget.

But early indications from third-quarter economic data show that Trump may have reason to boast about the third quarter, too.

The Atlanta Federal Reserve’s GDPNow measure, which uses available data to predict the current quarter’s GDP growth, stands at 5% as of Thursday — up slightly from an initial estimate of 4.7%.

The estimate has a strong track record of prediction. But GDPNow isn’t perfect, especially so early in a quarter, and it is subject to updates as more data emerges.

But Neil Dutta, head of US economics at research firm Renaissance Macro, pointed to data that shows the strong initial reading from the Atlanta Fed is likely to hold up.

While Dutta said it’s “unlikely that we’ll get 5% for the third quarter,” the economist noted that the average move for the GDPNow reading over the course of a quarter since its inception is a 0.6-percentage point drop. Given the initial reading, that would put the final third quarter GDPNow estimate at 4.1%, which would be on par second quarter and one of the highest post-recession readings.

Screen Shot 2018 08 02 at 2.23.43 PMRenaissance Macro Research

  • The biggest downward move in the GDPNow’s estimate over the course of a quarter was 2.2 percentage points, per Dutta’s breakdown, which would still leave GDP growth at a respectable 2.5%.
  • On the other end, the largest upward move was 1.5 percentage points, so an equal move from this quarter’s reading would put the third quarter at 6.5%. That would be the highest quarterly GDP print since the third quarter of 2003.

“Anything in that range is consistent with strong, above-trend growth and would be a reasonably solid number coming after a 4% GDP print,” Dutta said.

In the second quarter, the 4.1% GDP reading was also above the Atlanta Fed’s final estimate of 3.8%.

Trump, for his part, is already banking on a big third-quarter reading, which is set to be released October 26.

“I happen to think we’re going to do extraordinarily well in our next report,” Trump said at the press conference Friday.

More: Donald Trump Atlanta Fed GDPNow GDP Economic Growth

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