President Donald J. Trump tweeted on Monday morning that the gross domestic product (GDP) grew in 2018 at the fastest rate since 2005.

Within a couple of hours after the tweet, Forex Crunch announced President Trump’s remarks created no reaction in the stock market. Major U.S. equity indexes were trading mixed, with the Dow Jones Industrial Average down .08 percent on the day, the S&P 50 500 up 0.1 percent, and the Nasdaq Composite flat at 7,305 by Monday afternoon.

Presidential comments on the market can sometimes spook investors. Trump’s tweet had no negative effects.

Maybe that’s because the acting Director of the Office of Management and Budget (OMB) Russ Vought, said the U.S. GDP grew 1.3 percent over the four quarters of the fiscal year 2018, meeting the Trump Administration’s economic forecast two years in a row–making this the first administration to ever do that. The briefing was held March 11 at the White House.

Vought explained that the rise in GDP would compensate for tax cuts: “We are confident that the president’s historic tax reforms, deregulation, trade policy, unleashing American energy will continue our economic growth. Economic policies in this budget will generate more than enough revenue to pay for the cost of the tax cut.”

Gross domestic product is the total value of goods produced and services provided in a country.

On the Right Track

Vought’s estimation of the U.S. GDP is a bit lower than some experts give.

For example, the President of World Money Watch, Kimberly Amadeo, with 20 years in senior-level corporate experience in economic analysis and business strategy, reports a higher estimation of last year’s GDP rate increase–a 2.9 percent GDP increase. She gives President Trump’s tax plan for boosting U.S. economic growth as the reason for the increase.

Of note, Amadeo said the GDP growth rate over time is the best indicator to describe a nation’s economic growth over time. Positive growth is an indicator of the effectiveness of current economic policies.

“High growth must occur before unemployment recedes,” said Amadeo.

The U.S. unemployment rate fell to 3.8 percent in Feb. 2019 from 4 percent in the previous month and below market expectations of 3.9 percent.

The GDP and unemployment numbers reflect President Trump’s tweet that growth is beating market expectations.

Economists agree in general that the ideal GDP growth rate is between 2 percent and 3 percent, because faster growth could create a bubble. The Trump administration seems to be on the right track economically if we are to use Amadeo’s indicators. There is no danger of an economic bubble, given the U.S. growth is at a quick yet stable rate.

 

Tags: Categories: Politics