The mainstream media cheered over this, and all of a sudden there was a wave of optimism.
James Pethokoukis of the American Enterprise Institute warned shortly before the GDP number was released that "even a very strong report won't tell us whether the Trump tax cuts, passed in December, are 'working.' It's just too soon". Ayesha, the president clearly feeling pretty good, though, about these numbers.
"In one line: Looks great; won't last", Ian Shepherdson, the chief economist at Pantheon Macroeconomics, said in a note.
That modest assessment of the long-run rate implicitly resists arguments that Trump's tax cuts will lift the economy's potential to grow without hitting the speed-bump of inflation, though there's a range of views among policy makers.
The second quarter acceleration came in part after the injection of stimulus and Republican tax cuts.
GDP is a lagging indicator. The uptick was largely driven by solid consumer spending and a big expansion of USA products sold overseas. If consumers turn pessimistic, it hurts consumer spending. The total value of all USA stocks is now equal to 154 percent of the annualized GDP.
"The economy is now firing on all cylinders, and that growth is likely peaking", Bricklin Dwyer, senior USA economist at BNP Paribas, said in a research note.
With this said, it appears that USA consumers are rethinking their spending.
That is the second quarter in a row the measure, known as core PCE, has hit or exceeded the Fed's 2% target, and is likely to keep the central bank on track with its plans to raise interest rates gradually. They are products like furniture and home appliances. Consumers are still buying cars, clothes, and they are keeping America's restaurant industry in the black.
In early 2010, durable goods manufacturers were witnessing robust growth in their orders. Federal-funds futures were pricing in a 93% probability for another 25-basis-point increase in the central bank's target rate (currently 1.75%-2%) at its September 25-26 meeting, unchanged from Thursday, according to Bloomberg. Now, the growth rate is around seven percent.
What does this mean? Note, too, that the trade war with the European Union is on hold and that the future for soybean exports now seems rosy (elsewhere, the Post, borrowing from Nancy "Crumbs" Pelosi's play book, writes off this good news as "beans"). Growth will slow, but we may not have a recession. Slightly more than an hour before the June 1 release of that report, Trump had tweeted that he was "looking forward to seeing the employment numbers at 8:30 this morning". Skeptics disagree, saying the 4.1 percent number from the second quarter was the result of a combination of factors that won't be repeated.