U.S. GDP rises to 4.1%, President Trump takes credit for fastest economy expansion in four years

The nation’s economic engine accelerated substantially in the second quarter as consumer and government spending, along with a spike in U.S. exports ahead of expected retaliatory tariffs, lifted real gross domestic product to 4.1%,  according to the “advance” estimate released Friday (July 27).

The strong reading for second quarter annual GDP, the value of goods and services produced by the nation’s economy less the value of the goods and services used up in production, is the highest economic expansion since the U.S. saw robust growth 5.2% in the third quarter of 2014, according to the Bureau of Economic Analysis (BEA) report.

BEA releases three versions of the quarterly estimate for GDP. “Advance” estimates are released near the end of the first month of each quarter and are based on source data that are incomplete or subject to further revision by the source agency. Second and third estimates are released near the end of the second and third months, respectively, and are based on more detailed and more comprehensive data as they become available.

Although the advance estimates often change, White House and GOP officials hailed the preliminary second quarter economic report as a triumph for the nation’s economy under President Donald Trump’s stewardship.

“We’re on track to hit the highest annual average growth rate in over 13 years. And I will say this right now, and I’ll say it strongly: As the trade deals come in one by one, we’re going to go a lot higher than these numbers. And these are great numbers,” President Trump said in a statement, adding that his economic agenda was well ahead of two previous administrations that achieved only 1.8% of annual GDP growth.

“By contrast, we are now on track to hit an average GDP annual growth of over 3%, and it could be substantially over 3%,” the president said. “Each point, by the way, means approximately $3 trillion and 10 million jobs. Think of that. Each point — you go up one point — that doesn’t sound like much; it’s a lot. It’s $3 trillion and it’s 10 million jobs.

Trump continued: “If economic growth continues at this pace, the United States economy will double in size more than 10 years faster than it would have under either President (George) Bush or President (Barack) Obama.”

U.S. Rep French Hill, R-Little Rock, also weighed in on the quarterly GDP report.

“We have a booming economy with more jobs available than bodies to fill them …,” said Hill. “I’m pleased that the Tax Cuts and Jobs Act and regulatory reform we have worked hard to implement in the House has contributed to the healthy economic growth we’re seeing in our country today. I look forward to continuing our good work in Congress to ensure Arkansans and Americans have the opportunities to live out their dreams and provide well for their families.”

The same BEA data that highlights a strong U.S. economy also shows that the Arkansas economy is not keeping up with the rest of the nation. Earlier this week, Talk Business & Politics reported that Arkansas’ economy fell flat in the first quarter with zero percent GDP growth during a period when the rest of the nation was chugging along at a revised annual growth rate of 2.2%.

Overall, BEA officials said the strong GDP growth for the period ended June 30 is primarily from a pick-up in personal consumer spending and U.S. exports, as well as heavy government spending at the local, state and federal level that is reflected mostly in the healthcare sector.

Compared to the first quarter, current-dollar GDP in the second quarter spiked substantially by $361.5 million, or 7.4%, to $20.4 billion. That compares to current-dollar GDP gains of 4.3% in the first quarter.

Current-dollar personal income, however, fell slightly to $183.7 billion in the second quarter, compared with an increase of $215.8 billion in the first quarter. Decelerations in wages and salaries, government social benefits, personal interest income, and nonfarm proprietors’ income were partly offset by a pick-up in personal dividend income and rental income, rising contributions for government health insurance and an upturn in farm proprietors’ income.

Disposable personal income, or money left over for spending and saving after taxes, rose by $167.5 billion, or 4.5%, in the second quarter. However, that is well off the previous quarter when disposal household income increased 7% to $256.7 billion, or 7%, in the first quarter.

Personal saving was also slightly down in the second quarter to $1,051.1 trillion, compared with $1094.1 trillion in the previous quarter. The personal saving rate – personal saving as a percentage of disposable personal income – was 6.8% in the second quarter, compared with 7.2% in the first quarter.

The BEA will release its next GDP estimate for the second quarter on Aug. 29. The Atlanta Fed’s GDPNow model now forecasts second quarter GDP at 3.8%, down from the 4.5% estimate posted July 18.