The US second quarter gross domestic product (GDP) growth is stronger than initially thought, increasing at an annualised rate of 4.2%, which is the best performance in nearly four years, Lucia Mutikani for Reuters reports. This has put the economy on track for the Trump administration’s goal of 3% annual growth.
In January to March this year, the economy grew at a pace of 2.2%, and in April to June, the upward revision to 4.2% reflected factors such as less imported petroleum, according to Mutikani.
Consumer spending is also up, which could be attributed to Trump’s US$1.5tn tax cut package introduced in December 2017. However, in the early third quarter there were signs that momentum was lost. The government reported on 28 August that the goods trade deficit increased by 6.3% to US$72.2bn in July, as a 6.7% drop in food shipments weighed on exports.
Mutikani also reports the housing market has continued to weaken and homebuilding isn’t growing as fast as expected.
Mutikani quotes lead economist at Oxford Economics in New York: “We expect the pace of the expansion will cool in the second half of 2018, as the boost from fiscal stimulus starts to fade ... and trade protectionism weighs on activity.”
Reuters article
The right measurement? Although Trump is cheering himself on – on Twitter he said:
“GDP revised upward to 4.2 from 4.1. Our country is doing great!” – Senate democrats are looking at GDP growth and who it’s portraying, according to Emily Stewart for American news site
Vox.
Stewart reports that wages are still growing slower than they have historically, and hourly wages (adjusted for inflation) dropped by 0.2% in July 2018. Stewart also references a survey published in August 2018 of nearly 7,600 adults, which finds that in 2017, 40% of American families struggled to meet a basic need such as buying food, paying rent or medical bills.
Senate democrats Chuck Schumer and Martin Heinrich want to address this disparity between official measurements such as GDP and the overall economy. The pair are introducing a bill – the Measuring Real Income Growth Act of 2018 – to do so, with the aim of shedding light on where economic prosperity is showing up (or not) across different income groups.
The bill would require the Bureau of Economic Analysis (BEA), which reports quarterly GDP figures, to begin recording how growth is distributed along the income scale in the same quarterly reports. The bill would require the BEA to produce a new metric – the income growth indicator – and this would start in 2020.
The 4.2% GDP doesn’t indicate how the growth might differ for lower and middle-income Americans, writes Stewart. She refers to a statement made by Schumer, the Senate minority leader from New York: “America’s working families deserve the full picture when the federal government publishes data showing how the economy is doing, especially with quarterly GDP numbers. For too long, we have relied on GDP data as a bellwether for how Americans are faring in our economy.”
Vox article
Rebasing GDPWhile positive movements in the US aim to illustrate a truer picture of the country’s economy, the Philippines is looking to rebase its GDP figures, reports
BusinessWorld. Rebasing of GDP means replacing the old base year used for compiling the GDP with a new, more recent, base year for computing the constant price estimates. The Philippines will hold off until 2020 to use a new baseline to measure its economic growth.
According to national statistician Lisa Grace Bersales, the Philippine Statistics Authority (PSA) is looking at using 2018 as the new base year for GDP and, eventually, for inflation. According to
BusinessWorld, GDP and related macroeconomic data is currently measured against prices from the year 2000.
For the consumer price index (CPI), an updated base would introduce new items into the theoretical basket which are more representative of typical Filipino household expenditure, and for GDP, using an outdated base could mean that the growth of an economy may be underestimated.
BusinessWorld article
US GDP is at an almost four-year high, but who and what does GDP actually account for? With the US and Philippines looking at new ways to measure a country's economic growth, should the rest of the world follow suit?