Economic growth has slowed in the second quarter to a 2.1 percent annual rate mostly due to a drop in exports and non-farm private inventories, according to data released on July 26 by the Bureau of Economic Analysis.

The exports largely contracted due to America’s trade battle with China, where the Trump administration imposed import tariffs prompting a retaliation. Exports to the Middle Kingdom are down by more than $10 billion so far this year, compared to the same period (January-May) the year before.

The impact on China has been even larger, as the United States imported some $25 billion less from China this year.

After a build-up in inventories in the first quarter—partly stemming from the weakening exports—the second quarter drop was to be expected.

“The Trump economy is growing strong and, on the heels of 3.1 percent growth in the first quarter, is poised to continue expanding,” said Commerce Secretary Wilbur Ross in a July 26 release. “President Trump’s ambitious agenda of deregulation, tax reform, and job creation is making the U.S. the premier place for business, and is restoring our position as an economic leader on the world stage.”

President Donald Trump said in a July 26 tweet that the gross domestic product (GDP) growth was “not bad considering we have the very heavy weight of the Federal Reserve anchor wrapped around our neck.”

Trump has blamed the Fed’s series of interest rate increases last year for slowing the economy, saying there’s “almost no inflation” and “USA is set to Zoom!” presumably under the condition that the central bank cuts the rates.

The Fed is indeed expected to do so at its end-of-July meeting, having the stock market giddy for cheaper cash.

Ross pointed to some strong numbers deeper in the GDP data, such as the 4.3 percent surge in consumer spending—”the engine of the U.S. economy.” In particular, spending on goods rose at the fastest rate since the first quarter of 2006, he said.

“The Trump Administration’s policies have delivered repeated wins for American workers. In July, the current economic expansion became the largest in U.S. history—a testament to the strength of President Trump’s business-friendly policies.”

Job Market

Trump tax and regulation cuts have boosted the economic expansion, which has beaten economists’ expectations in multiple regards, especially in the job market.

After underwhelming 70,000 jobs added in May, payrolls expanded by 224,000 jobs in June, handily beating expectations.

The unemployment rate has remained under 4 percent for 13 out of the 15 past months, standing at 3.8 percent in June.

Amid concerns over skilled labor shortages, the administration obtained pledges from hundreds of companies to provide apprenticeships and job training to 10 million Americans.

Meanwhile, Americans’ dependency on the government has diminished, most visibly in the decline of more than 6 million in food stamp enrollment over the past roughly two years.

“The tight labor market benefitted American workers,” Ross said, pointing to the nominal average wage growth of 3 percent or more in each of the 11 months ending June.

“Before 2018, nominal average hourly wage gains had not reached 3.0 percent since 2009,” he said.

Follow Petr on Twitter: @petrsvab

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