The US economic data for the last quarter was released and it showed a growth of 2.1%. The increased spending by the consumers helped the gross domestic product and total output of services and goods to increase much greater than the expected rate. Previously, it was speculated that the growth would be capped at 1.9%. The October-December growth showed that the consumer spending helped to offset a lack in trading sector. Economic experts predict that the economy will grow by another 2% from January – March and the growth will strengthen as consumers spend more.
The jobs now provide a higher income as tax cuts and increased wages become possible. The GDP growth for 2017 is predicted to be 2.3%. In 2016, the growth suffered as the economy grew just by 1.6%. It was the weakest since 2011 and Obama had to face a lot of criticism. The economy data of US averaged around 2.1% since 2009 after the Great Recession. The end of Obama administration helped push the growth in the last quarter of 2016. Consumer spending makes up for two-thirds of the economic activity contributing towards GDP growth. Previously, it was estimated to be 3% while the consumer spending for the last quarter increased by an impressive 3.5%.
Trump had promised an economic growth of 4% during his election campaigns. Economists are doubtful because such an optimistic goal is difficult to achieve, if not impossible. The economy is geared up for growth, but it is not supported enough by the working sector. The workforce is aging and the productivity growth is not impressive. Trump, however, claims that his proposed tax cuts, increased infrastructure spending, and deregulation would push the economy in the forward direction and the growth is sustainable.
Trump faced support issues within his own party when his health care reform bill was rejected for a voting in the Congress. Trump administration is now focused on developing a tax plan to cut down both personal and corporate taxes. It is one of the most campaign pledges of Donald Trump. The White House administration is keen on getting approval for the tax measures before August. Steven Mnuchin, Treasury Secretary is hopeful that the tax plan would get Congressional approval before the fall season. Mnuchin said that economic growth of 3% is completely possible with the given momentum.
Even though the Trump administration proclaims a major boost in economic growth, many economists express their concern. National Association for Businesses Economists announced its forecast data and it is expected that economy would gain 2.3% in 2017 and 2.5% in 2018. These numbers are much less than the 4% proclaimed by POTUS Trump.
Trump’s goal of reaching faster GDP growth is hindered by the measures of Federal Reserve. The Fed announced an interest rate hike in the past month, increasing the interest rates two times in just three months. The Fed news also confirmed that the interest rates will increase thrice in this year. This measure is done to keep the inflation problem at bay, but it would now allow GDP to grow at a faster rate.