Trump’s GDP ‘Boom’ in First Quarter Significantly Owed to China
April 29, 2019 (EIRNS)—The Commerce Department’s April 23 reported growth in U.S. Gross Domestic Product in the first quarter of this year, 3.2%, was nearly double the growth rate which had been forecast by “analysts,” and four times what Federal Reserve banks had been forecasting six weeks earlier. Apart from indications that the report may have been too good to be true, a significant part of the unexpected expansion was “carried” by China’s strong economic growth in the same period.
The reported American economic growth came despite a decline of industrial production in the quarter, no change in business capital investment—with a nearly $1 billion decline in farm equipment purchases—and a mere 1.1% growth in consumer expenditures. These usually dominate the GDP, given that definitions of “production” and “capital investment” include plenty of non-productive activity. What, then, constituted the growth? A big improvement in the U.S. trade balance, and a very big increase in business inventories.
Since industrial production fell and imports fell, the $35 billion in new inventories were neither produced nor imported; they remain mysterious and may have been “adjusted.”
The trade improvement was real. China’s reaccelerating economic growth, combined with its performance of the commitments President Xi Jinping had made to President Donald Trump at their Dec. 1, 2018 summit in Buenos Aires, led to a big 21% increase in American exports to China in the first quarter 2019, while American imports from China fell by 3.6%.
This U.S. trade blessing occurred while world trade was actually shrinking for five months through February, and a stronger and stronger U.S. dollar was reflecting growing new currency crises in the developing sector. China’s own export growth is coming from countries of the Belt and Road Initiative.
It is evident that these two great powers, through Presidents Xi and Trump, must cooperate economically, scientifically, and in creating credit for productive development projects, to head off a financial crisis and crash.