The Trump economy might be peaking


President Trump is likely to get some much-needed good news on July 27, when the Commerce Department releases GDP numbers for the second quarter.

Economists think GDP grew by at least 4% in the quarter that ended June 30, with some estimates coming close to 5%.

The actual numbers don’t always track forecasts, but many forces are lining up to make second and perhaps third-quarter growth numbers this year the strongest since 2014. If GDP growth exceeds 5.2% – the growth rate for the third quarter of 2014 — it will be the strongest pace since 2003.

The good times may not last, however. The tax cuts that went into effect earlier this year, along with about $250 billion in additional government spending for 2018, are creating a stimulus effect that could crest this year, then dissipate.

The protectionist tariffs Trump is implementing will further harm growth later this year, and next, if they remain in place or intensify.

Forecasting firm IHS Markit predicts real GDP growth, adjusted for inflation, will hit an annualized rate of 4.8% for the second quarter, and 3% for all of 2018. Growth will then fall to 2.7% in 2019 and an anemic 1.7% in 2020, the firm predicts.

“The timing of the trade war could not be worse,” IHS economists wrote in their latest monthly update. “It is occurring as monetary stimulus is beginning to wear off, oil prices are elevated and political risks are on the rise.”

GDP growth plunged during the Great Recession, then sputtered under President Obama, averaging just 1.5% per year during his eight years in office. Excluding 2009, when the recession Obama inherited bottomed out, growth still averaged just 2.1%.

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