White House economic adviser Larry Kudlow said Sunday he believes the 4.1 percent growth the U.S. recorded in the last three months is sustainable in the coming months despite skepticism expressed by independent economists.
“There’s just a lot of good things going on,” Kudlow told CNN. He said President Donald Trump “deserves a victory lap,” with “low tax rates, rolling back regulations, opening up energy, for example. Trade reform I think is already paying off. The fundamentals of the economy look really good.”
He said “business investment spending is really booming. That’s a productivity creator. That’s a job creator. That’s a wage creator for ordinary mainstream folks, terribly important.”
Kudlow said the five calendar quarters occurring fully during Trump’s 18-month presidency have now been recorded with average economic growth of 2.9 percent for the world’s largest economy.
“I don’t see why we can’t run this for several quarters,” Kudlow said.
As the 4.1 percent growth rate for the April-to-June period was announced Friday, Trump boasted that the U.S. was on track to hit its highest annual growth rate in its gross domestic product in 13 years and predicted that as the country reaches new trade deals with other countries, the U.S. would exceed its second quarter advance.
“These numbers are very, very sustainable,” he said. “This isn’t a one-time shot.”
On Sunday, Trump said on Twitter, “The biggest and best results coming out of the good GDP report was that the quarterly Trade Deficit has been reduced by $52 Billion and, of course, the historically low unemployment numbers, especially for African Americans, Hispanics, Asians and Women.”
Skeptics less upbeat
Some independent economists, however, voiced skepticism that the $18.6 trillion annual U.S. economy would continue to advance at the same pace as the last three months.
Some forecasters said the gains in recent months were mostly, although not totally, the result of temporary factors, such as the initial boost from tax cuts Trump supported that took effect earlier this year. Most analysts say that for all of 2018 the U.S. could reach 3 percent growth, which would be the best since a 3.5 percent gain in 2005, but not again hit the annual 4.1 percent growth rate recorded last quarter.
“We believe quarter two will represent a growth peak as the boost from tax cuts fades, global growth moderates, inflation rises, the Fed tightens monetary policy and trade protectionism looms over the economy,” said Gregory Daco, chief U.S. economist at Oxford Economics.
Mark Zandi, chief economist at Moody’s Analytics, said, “The second quarter was a strong quarter, but it was juiced up by the tax cuts and higher government spending.”
In the U.S., consumer spending accounts for about 70 percent of the economy, with Ian Shepherdson, the chief economist of Pantheon Macroeconomics, saying that such spending accounted for the robust second quarter.
“Consumers were really on a tear,” he said. “So to grow at 4 [percent] probably tells you people were spending the tax cuts that they enjoyed back in January, but that’s extremely unlikely to happen again.”