According to preliminary data, the US economy grew by 3.2% in the first quarter of 2019. This is evidenced by the preliminary data of the Ministry of trade of the country. According to a survey by Bloomberg, analysts on average expected an increase of 2.3%. Experts find it hard to believe in the impressive growth of the US GDP.
“The reasons for the revision of the forecasts of international organizations at the moment is not enough, because a significant acceleration was due to the growth of stocks of goods and a reduction in the trade deficit, that is, an increase in net exports,” says Alexandra Ovchinnikova, Junior analyst at freedom Finance.
At the same time, such important components of GDP as consumer demand, investments, and others showed significantly weaker dynamics, notes Narek Avakyan, head of investment Department of BCS Broker.
Thus, consumer activity in the first quarter of this year increased by only 1.2% against the growth of 2.5% in the fourth quarter of last year, the demand for durable goods fell by 5.3% against the growth of 3.6%.
Nor is the growth of private investment impressive: it was only 1.5% against 3.1% growth in the last quarter of 2018.
According to Narek Avakyan, in General, much will depend on the results of economic growth in 2-3 quarters, since the beginning of the year is not too representative to assess the overall economic situation.
“In part, these are purely statistical tricks. For example, the first estimate of US GDP for the fourth quarter of 2018 gave an increase of 2.6% year-on-year, and the second estimate in a month is only 2.2% and the current 3.2% of us Bureau of economic analysis is only the first preliminary estimate of the first quarter and it can be adjusted in the future until June»,
— explains Peter Pushkarev, chief analyst of Tele Trade.
In General, experts are very pessimistic about the future of the American economy. The IMF’s April forecast noted that United States GDP growth would decline to 2.3% in 2019 and continue to decline to 1.9% in 2020.
“A sweet pill to swallow»
Meanwhile, President Donald Trump promised that his economic policy, which consists, in particular, in reducing taxes and weakening regulation, will lead to economic growth by 3% or more in 2018 and in the next six years.
However, last year our economy failed to reach the promised target and grew by only 2.9%.
The slowdown in our economy was evident in the last quarter of last year. Then the US showed an increase of 2.2% against the initial estimate of 2.6%.
Economists say that in 2018, the US economy was mainly supported by fiscal incentives, but in 2019, trump’s tax cuts will no longer be able to warm up the economy.
Recall that in December 2017, us President signed the law on tax reform. It was supposed to ease the tax burden for all sorts of taxpayers, primarily for businesses, corporations, and enterprises.
Along with a significant increase in public spending, tax incentives were “sweet pill” — intense, but short-lived, said Quartz economist at Pantheon Macroeconomics Ian Shepherdson.
The Federal reserve (fed) is generally even more pessimistic than the IMF. The forecast for this year’s economic growth is only 2.1%, next year — 1.9%.
The main reasons for fears for the growth of our economy are the slowdown in global growth, as well as trade conflicts, in particular, between the US and China,
Gregory Daco, head of the Research Committee of the National Association for Business Economics( NABE), recently told CBS.
The US trade wars have so far done more harm than good to us economy. Since the “shootout” of duties with China, as well as Mexico, Canada, and the EU, our exports have fallen in several categories, while the trade deficit is growing. According to official statistics, our trade deficit at the end of last year reached a historic record and amounted to $891.3 billion, of which more than $400 billion — the trade deficit with China. Namely, the reduction of the deficit was one of the main promises of trump.
As a result, the American economy in trade wars lost almost $8 billion or 0.04% of GDP, previously estimated by the National Bureau of economic research (NBER).
Economists warn that the trade deficit will remain high, regardless of whether the United States and China concluded a trade deal soon. Negotiations between Washington and China to resolve the fierce trade war are delayed.
At the same time, the US is involved in a trade conflict with the European Union. Earlier it became known that the United States is studying the possibility of introducing new duties on goods of European production, including civil aviation, wine, and cheese. The tightening of our trade policy is associated with EU subsidies to Airbus.
The fed is the cause of the ills of America
However, according to Trump, not trade wars — the cause of turbulence in our economy, and the fed and it is head, Jerome Powell. Us President accuses Powell of restraining the growth of the economy and the stock market.
The fed has repeatedly provoked the anger of trump, raising interest rates at the time of acceleration of the economy and reducing unemployment.
“Frankly, our performance would now be above 4% instead of 3.1% (estimate of GDP growth in 2018 from the White house — “Газета.Ru”), if someone was not engaged in raising interest rates and quantitative restrictions,” — said the American President.
At the same time, even the statements of economists that higher interest rates are a way to fight inflation and prevent overheating of the economy did not save from criticism of trump Powell.
However, recently the fed heeded trump’s advice.
After raising rates for five consecutive quarters, the fed sharply changed course this year and said it did not foresee an additional increase in 2019, given the slowdown in our economy. At the last meeting of the fed, which took place in March, us regulator kept the base interest rate in the range of 2.25–2.5% per annum.
However, some experts believe that this is unlikely to help and in General, the United States faces the threat of a recession.
In March, the yield of 10-year us Treasury securities fell below the yield of three-month Treasury bills. This is called the inverted yield curve — it is a sign of a recession, the probability of which is 25-30%, wrote Forbes, citing a study by economists Frederick Mishkin and Arturo Estrella.
Nobel prize-winning economist Robert Schiller also believes that the state of us economy, housing, and stock markets, combined with continued low interest rates, could mark a recession. This is especially likely to happen in the next 18 months, he told CNBC.