The US economy is slowing down and there is need for a US GDP slowdown reversal pretty quick! In fact, over the first three months of 2017, GDP has expanded by only 0.7% against analysts’ expectations of 1%. This is the slowest rate since the same three months in 2014. This information was published Friday by the US Department of Commerce BEA (Bureau of Economic Analysis). In the last quarter of 2016, real GDP increased 2.1 percent.
The Bureau stressed that the 2017 figure was an estimate based upon incomplete data. Another ‘estimate’ based upon ‘more complete data’ will be published on May 26. Nevertheless, this data still indicates a slowing down of the economy. During his election campaign, President Donald Trump pledged to increase US growth to 4%.
Is the US economy slowing down? The White House proposed a reduction of corporation tax Wednesday, perhaps in an attempt to help the President to deliver on his 4% growth promise. Steven Mnuchin, Donald Trump’s Treasury Secretary, revealed the President’s tax plan that is looking at slashing the business tax rate from 35% to 15%. That is a massive reduction that will raise some eyebrows!
His plan also included some ‘undetailed’ suggestions of individual tax reductions and incentives to persuade businesses to transfer overseas cash reserves back to the USA. None of this will enable Donald Trump to achieve his 4% growth, lower tax rates in particular! It is a long call, particularly in view of the fact that the US economy has never increased consistently by more than 3% since the 1990s. That said, first-quarter growth historically tends to be low, and then picks up as the year proceeds. Nevertheless, the final quarter of 2016 saw a growth rate of 2.1%, so this drop to 0.7% is bad news.
What caused this US GDP slowdown? Reduced consumer spending is the main reason given by economists. Spending in the automotive industry had dropped from a high at the end of 2016, and spending on heating has been lower due to warmer weather than expected – global warming perhaps?
So is the US Economy Slowing Down? Yes it is, but while government officials and the President believe they know why, perhaps there are other reasons. Maybe some people have less faith in the future than they did have. It seems trite to blame warm weather and car sales on such a large drop in the US economy.
It seems like the US government has a job on its hands to secure the radical legislation in Congress that may be required to achieve a recovery of the US GDP slowdown. The US economy is slowing down, but that may be reversed. The question is how! The next few months will be exciting to live through and watch!
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