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US Growth

November 4, 2017

US data has revealed that the economy has its fastest six-month stretch of growth in three years despite a devastating period of natural disasters. This growth is followed by the 3.1% growth in the Q2, making it the first six-month stretch since 2014 in which US gross domestic product grew more than 3 per cent in consecutive quarters. The 3% growth recorded in Q3 of 2017 was unexpected, economists believed the hurricanes in Texas and Florida to slow down growth and weigh on the US economy. Thee strong growth numbers were derivatives from increasing consumption and investment. In response, the dollar rose 0.4%, reaching its highest level since July.

Markets expect the Federal Reserve to be even more certain to cut down the quantitative easing program, and raise its policy rate more aggressively than previously expected in the next few months. Ian Shepherdson of Pantheon Macroeconomics said that sub 4% unemployment rate is “just a matter of months away”. Given that the Fed guides its decision-making on unemployment data, a more aggressive stance seems plausible.
 

Keith Knutsson of Integrale Advisors commented, “the US economy is making strong progress, but determining whether to attribute the growth to the past, current or no administration is difficult.”


The Trump administration presented these figures as proof that a promise of lower taxes and reduced regulation brings faster growth, attempting to bolster the credibility behind the proposed tax cut plan sitting in Congress. The most recent published economic paper from Trump’s Council of Economic Advisers argued a US corporate tax rate reduction to 20% would add 0.5% to the growth rate in the first year and over 3 per cent within five years.

 

This article originally appeared on my blog Here.

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