President Trump’s invoices have surpassed financial markets and increasing global commercial standards. They are now disturbing economic growth measures as well.
The gross domestic product of the US, adapted to inflation, decreased at an annual interest rate of 0.3 % during the first three months of the year, the trade department said on Wednesday. It was, on the surface, an amazing reversal of strong growth at the end of last year, when the economy was expanded with 2.4 %.
But the first trimester was misleading, the result of the peculiarities in the way economic activity is measured. The most reliable data on consumer spending and business investment suggested that growth slowed down in the first quarter, but remained fundamentally stable.
However, this strong foundation could be eroded quickly. Economic activity in the first quarter was temporarily rejected by consumers and businesses who are struggling to import goods before the entry into force of Mr Trump’s invoices. And that was before the full extent of these policies it became clear. Forecasts are widely awaiting that costs and investments will slow down in the coming months, as invoices increase prices and uncertainty keeps businesses on hold.
“There are many reasons to wait for the underlying trends in the American economy to soften,” said Ben Herzon, an economist at S&P Global Market Intelligence.
Consumer spending slowed in the first quarter, rising at an annual rate of 1.8 %, from 4 % at the end of last year. But economists said they were at least partially because of the harsh winter storms that hit the southern states in January, causing many buyers to stay at home. So far there is a minimal sign that the sudden fall of the feeling of consumers that started shortly after Mr Trump has been translated into a pullback on actual expenses.
On the contrary, the decline in GDP in the first quarter was almost entirely due to a huge increase in imports, as consumers and businesses tried to start Mr Trump’s invoices. This wave shaved almost five percentage points from GDP growth in the first quarter.
To understand why the explosion of imports has led to a reduction in GDP, it helps to understand a little about how the numbers are calculated.
GDP, as the name implies, aims to measure only the products produced in the domestic market, not imports that are produced abroad. But instead of measuring production immediately, the government counts all the goods and services sold in the country and then removes what happened abroad. (He also adds exports, which are produced in the domestic market but sold to foreign buyers.)
This means that, in theory, it introduces neither adds nor removes from GDP, anything imported into the country should appear in other parts of quarterly data either as consumer costs or as a unsold product held in stock – both calculated as additions to GDP.
In practice, however, the government is good to measure both imports and consumer costs, but they often have to be based on raw estimates of stocks, especially on preliminary data. The first quarter data showed only a moderate increase in stocks, despite the jokes of companies that store products and materials before invoices.
Economists predicted that the data of the first three -month stock would be revised either higher when the data are more available or the stocks would jump in the next quarter, resulting in a mirror image of Wednesday’s report.
In addition to such peculiarities in the data, however, economists said the longest route of the latest data is clear: consumers and businesses began to change their behavior in response to Mr Trump’s policies even before the April 2 invoice announcement sent by a TAILs. The full impact of these policies will not be clear for months, but economists warn that the damage could be important, especially if Mr Trump continues to change his approach to an almost daily basis as he has last month.
The US economy has proven remarkably durable in recent years, repeatedly defying the predictions of a recession. Economists have said there are still power pockets that could help to withstand the executives put in it by Mr Trump’s policies. But growth slowed even before that year, leaving less than a pillow.
“We continue to put weight on the economy instead of lifting the weight,” said Diane Swonk, head of the KPMG accounting company.
