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Private Sector GDP Growth is Kind of Anemic

Today’s GDP report got me curious about something: how does private sector GDP compare to total GDP? That is, if you pull out government contributions to GDP growth, what does purely private-sector growth look like? Here it is:

Private sector growth has been declining since the start of the expansion, and that decline has picked up speed over the past two years. It’s no wonder President Trump was so eager to agree to sizeable increases in the federal budget this week. He knows perfectly well that his tax cut has worn off and he needs all the help he can get from government spending to prop up an increasingly anemic private sector. For the next year, anyway.

Personal consumption was up a healthy 4.3 percent, but business investment plummeted -5.5 percent. Exports were down and imports were flat. Federal government spending added more than usual to GDP by about 0.4 percentage points. State government spending was also higher than average, by about 0.2 percentage points. If government spending had been at normal levels, GDP would have increased 1.5 percent instead of 2.1 percent. Inflation was higher than last quarter.

Overall, this is an OK but not great GDP report for the private sector, saved only by higher government spending.

The most remarkable thing about Donald Trump is how eerily stable his approval rating is. Here is 538’s chart over the past year:

After the Republican tax cut passed in late 2017, Trump’s approval rating rose to 41 percent and it’s stayed within two points of that ever since. I don’t know if this is good or bad—bad for Trump, I suppose, since that’s a tough re-elect number—or if there’s much Trump can do to improve it. But it’s definitely unusual. It sure looks like nearly everyone has their mind made up about Trump and isn’t likely to change it.

 

Source: Private sector GDP growth is kind of anemic

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Here’s Why We Suddenly Stopped Hearing About A Recession

Topline: Economists—especially after the stock market took a dive in December—had been warning that a recession was coming, and possibly imminent. But a combination of low-interest rates and an improving labor market has quickly silenced those fears — and complicating the hopes of Donald Trump’s foes in 2020.

  • The risk of a recession decreased last week after the Federal Reserve declined to raise interest rates this year, said Brian Rose, senior Americas economist at UBS Global Wealth Management’s Chief Investment Office.
  • Combined with a stock market bounce-back and a growing economy, investors are now optimistic — a big shift from earlier this year.
  • Major economic predictors showing an increased threat of a recession have scaled back it’s predictions in recent weeks.
  • Asterisk: If President Donald Trump escalates the trade conflict with China by adding more tariffs on Chinese imports—particularly auto parts—the economy could suffer, increasing the chances of a recession, Rose said.

Earlier this year, half of economists surveyed by the National Association for Business Economics predicted a recession in 2020. Another poll of economists by the Wall Street Journal in January put the chances of a recession at 25 percent—the highest since 2011.

Coverage piled on (a few examples: “4 Signs Another Recession Is Coming―And What It Means For You,” “A recession is coming, but don’t flee markets yet,” “The Next Recession Is Coming. Now What?”), with many predicting bad news for Trump (Politico: “Trump advisers fear 2020 nightmare: A recession”). Some industries girded for the worst, like online lenders, who tightened its rules to lessen risk.

And then, suddenly, the panic eased. Now Goldman Sachs economists say there is only a 10 percent chance of a recession. What happened?

The biggest factor in that shift came when the Federal Reserve opted not to not raise interest rates, a pleasant surprise to economists. Rose said lower-than-expected inflation led the Fed to keep rates modest.

The economy, too, has grown, allaying recession fears. According to the latest job numbers, the U.S. has the lowest unemployment rate in 50 years.

“It is hard to have a recession when unemployment is this low and interest rates are this low,” Richmond Federal Reserve president Tom Barkin said on Wednesday.

The biggest risk of recession comes from Trump himself. If he increases tariffs on more goods than the $200 billion in Chinese imports he’s already promised, the risk of a recession increases, Rose said. As trade negotiations remain rocky, investors are increasingly concerned.

“Left on it’s own, there’s little risk to the economy,” he said. “The real risk of a recession comes from policy, particularly trade.”

Barring another recession, positive economic growth should mean good news for Trump in 2020. But as it stands, Trump is still relatively unpopular (his approval rating sits at 46 percent, although that is a high for him). And most forecasters agree the economy won’t grow as much as the White House says it will.

“A normal president with these economic numbers would have job approval somewhere in the vicinity of 60%,” Republican pollster Whit Ayres told the Los Angeles Times. “But Donald Trump is a nontraditional president, and he has, at least at this point, severed the traditional relationship between economic well-being and presidential job approval.”

Still, a recent CNN poll found that 56 percent of Americans approve of Trump’s handling of the economy. And while many Democrats haven’t focused on the latest job numbers, Senator Amy Klobuchar (D-MN), who is running for president, tried spinning the numbers a different way during an appearance on CNN, crediting President Obama with job growth.

I’m a San Francisco-based reporter covering breaking news at Forbes. Previously, I’ve reported for USA Today, Business Insider,

Source: Here’s Why We Suddenly Stopped Hearing About A Recession

China Stops Buying U.S. Oil, Two Months After Record Total – Ken Roberts

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China has turned off the U.S. oil spigot. A response to the full-on trade war between the United States and China, it is a both a stunning turn-around, coming just two months after record exports there, and a stark reminder of the difference between what it means to live in a free country and one that is not. In 2017, China accounted for 20 percent of all U.S. oil exports. It played an out-sized role in the United States’ fastest-growing significant export and trailed only Canada for market share…….

Read more: https://www.forbes.com/sites/kenroberts/2018/10/18/china-stops-buying-u-s-oil-two-months-after-record-total/#2beb67655d00

 

 

 

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