After disappointing results at the end of the previous year, the US national GDP has experienced a significant leap in the 1st quarter of 2019.
A GDP Boost Brings Relief to the White House
The US economy seems to have recovered in the first quarter of 2019 after a shaky end of the previous year. This recovery reflects best in the GDP growth that went from 2.2% at the end of last year to 3.2%. That is a major step forward compared to the expectation of experts who assumed that the GDP growth wouldn’t go over 2%.
Consumers who are considered to be the founding pillar of the American economy, according to administration, increased their spending, and thus contributed significantly to this optimistic GDP percentage.
Vendors are thrilled to see their businesses back on their feet after a weak February performance. Economists, as well as the government, are breathing freely again after these favorable changes.
Before this, Americans had plenty of reasons to be worried about and to spend less. There was a plunge in many stock prices due to high tensions with China and the ongoing trade war. When you add to that all the government’s employees that were left without salaries because of the prolonged government shutdown, this anxiety and fear are completely justified. However, as time went by, people have shaken off these fears and returned to their spending habits.
Americans are among the most prominent spenders in the world, and while they are doing well, the American economy is also following suit. Although many revel in this GDP growth, there are some warning signs that should not be ignored.
Many think that this GDP growth was induced by the abundance of goods in stock and the decrease of import, so they believe it will be short-lived. However, once these favorable conditions change, experts predict the GDP to drop to around 2% and stay there.
Various tax cuts boosted the GDP in 2018 and caused a rise in federal spending; the favorable effects of these cuts are at their peak, and experts expect them to slowly decline as the year goes by.
This attitude, however, clashes with Trump’s great expectations that the national GDP is going to linger around the wanted 3%.
A renowned economist and the White House economic advisor, Larry Kudlow, shares Trump’s optimistic view, saying that despite all the warnings coming from different sides, he hopes the whole year will be good for the American economy — not just the first quarter.
But Kudlow’s bright forecast doesn’t end there. He also believes that there will be an additional increase in investments in the business sector, which will exceed expectations and predictions for 2019.
The latest report from the Department of Commerce casts a shadow over these bright prognoses. This report shows that the non-residential fixed investments, for example, investments in hotels, motels, and other non-residential objects have dropped in the first quarter, accompanied by the number of shipments of the essential capital goods. That is an obvious sign that business investments are slowing down after they have used up the potential of tax cuts.
While the president is touting incessantly about the GDP rise, considering this as an evident proof of his own success, Heather Boushey, another economy expert says that GDP is only one economic parameter that provides but a peek into the state the country’s economy is in. According to her, it is not sufficient that we know the national profit has increased; it is essential to find out how this profit is distributed.
Simply put, it is crucial to know where the money goes. She also said that the ones who suffered the most earlier had recovered the fastest, giving the example of workers at the bottom of the paying charts, who gained a considerable wage raise due to the national and local minimum wage increase, as well as the strengthened employment market.