Economic Growth Has Been Revised Downward. Again.

JM Ashby
Written by JM Ashby

Earlier this month, economists surveyed by Reuters predicted that economic growth for the second quarter of the year would be revised down from the Commerce Department's initial estimates and that is exactly what has happened.

The Commerce Department reported this morning that the economy grew at an annualized rate of 2 percent, not 2.1 percent, and I think we have reason to believe it will be revised downward again.

From the Associated Press:

Despite the resilience consumers are showing, the overall economic picture is weakening. The gross domestic product, the broadest gauge of economic health, advanced at a moderate 2% annual rate in the April-June quarter, the government said Thursday, down from a 3.1% gain in the first quarter. Thursday’s revised figure for last quarter was slightly lower than the government’s initial estimate of 2.1% annual growth. [...]

The biggest factor in the government’s downward revision for the April-June quarter was a smaller gain in spending by state and local governments and fewer export sales. American exports have been hurt by the retaliatory tariffs China and other countries have imposed on U.S. soybeans and other products. That drop was offset by the increase in consumer spending to a rate of 4.7%, up from an initial estimate of 4.3%.

Once you understand that the economy is largely being kept afloat by consumer spending on imports while exports falter, you can appreciate just how ass-backwards Trump's trade war is and how it is the most significant source of distress in the economy right now. Consumer spending, as strong as it still is, is being restrained by Trump's tariffs.

Economists surveyed by Reuters expected the government would revise growth downward to 1.8 percent rather than 2 percent, but it's possible that may still happen. Growth figures from 2018 were revised downward as recently as last month and economists expect growth will slow to 1.8 percent in the current quarter.

I'm not an economist, but I personally believe almost every economic report released by the Trump regime is later revised downward because they're plugging in assumptions and expectations that can't account for the weekly machinations of Donald Trump that result in losses.

I assume the weekly if not daily swings of the market are bound to have some impact on the greater economy over time, contributing to uncertainty and pessimism, and it's possible we have no good way of measuring that since no previous administration has so whimsically toyed with the market through tweets and bluster.

With consumer spending keeping the economy alive, it remains to be seen what will happen once Trump imposes tariffs on all remaining Chinese goods including many consumer products like shoes, shirts, and cell phones.

  • muselet

    It’s remarkable that Rs learned nothing from the unedifying example provided by their fellow Republicans Senator Reed Smoot, Representative Willis C. Hawley and President Herbert Hoover.

    When the Tariff Act of 1930 passed, raising tariffs on agricultural and manufactured goods, it faced serious opposition:

    In May 1930, a petition was signed by 1,028 economists in the United States asking President Hoover to veto the legislation, organized by Paul Douglas, Irving Fisher, James TFG Wood, Frank Graham, Ernest Patterson, Henry Seager, Frank Taussig, and Clair Wilcox. Automobile executive Henry Ford spent an evening at the White House trying to convince Hoover to veto the bill, calling it “an economic stupidity.” J. P. Morgan’s chief executive Thomas W. Lamont said he “almost went down on [his] knees to beg Herbert Hoover to veto the asinine Hawley–Smoot tariff.”

    [links and citations omitted]

    Sounds familiar, doesn’t it?

    Tariffs don’t help anyone, and Congress needs to rein in Donald Trump before his tariff obsession ravages the world economy worse than it already has.


    • Draxiar

      I suspect they don’t rein him in because in some way they profit from the whole thing.

    • simpfan