United states: solid growth before the lash of tax cuts

Photo: Bill Pugliano, Getty Images Agence France-Presse
According to the White House, the tax reform is going to lead to wage increases and new jobs for american workers.

The growth in the us has confirmed its good health in the third quarter, bringing water to the mill of Donald Trump who claims to be able to grow sustainably through income tax cuts and economic reforms.

 

From July to September, the expansion of the GDP of the United States amounted to 3.2 % at an annualized pace, or 0.1 percentage point less than the previous estimate. In spite of this small disappointment, the u.s. economy posted its best growth for three years, for two consecutive quarters. In the second quarter, the GDP had increased 3.1%, after 1.2 % in the first.

 

Of what to gladden the White House, which hopes to accelerate the world’s largest economy at the top of this level, in particular with the tax reform voted on Wednesday. The redesign tax reduces some of the taxes on income and, especially, lowers significantly the corporate tax from 35 % to 21 %. This is going to cause a widening of the deficit of the State in the long term of at least 1500 billion dollars, but the government Trump ensures that this will greatly boost the economy and therefore the budget revenue. “This landmark legislation is going to lead to wage increases and new jobs for american workers, establish a more fair system for all and generate stronger growth that will illuminate and ensure the future of our country,” said on Wednesday Steven Mnuchin, secretary of the Treasury.

 

Even the federal Reserve (Fed) has recently taken into account — but not as much as the government — largesse in the budget will stimulate economic activity. The central Bank raised last week its growth forecast of 0.4 of a percentage point to 2.5 %, to 2018.

 

At 3.2 %, the third quarter performance marks even more of its strength that it could have been affected more severely by the hurricanes of the season. “Despite the expectations that the growth suffers from the three hurricanes of the summer, the economy has fared well,” said Blerina Uruci, economist at Barclays Research.

 

“In detail, it has the picture of an economy well-oriented in the third quarter, with robust consumer spending, job gains continued, wages begin to rise, low interest rates and a strong confidence” of households and firms, summarizes Gregory Daco, of Oxford Economics, in a note.

 

The promises of tax cuts and gestures of the companies on the remuneration could help to support these on consumer spending, the key to the continued expansion in the coming quarters. Because ” for GDP growth is maintained above the figure 3, the consumption needs to accelerate “, a summary of the main economist for the United States to FTN Financial’s Chris Low.

 

This fourth quarter, from October to December, the air well under way, with good indicators, but “viability” momentum “over the next year will be the test,” adds the economist.

 

“The tax relief could help, especially if companies follow the example of AT&T or Comcast paying employees bonuses linked to the cuts in tax “, he continued. The banks are Wells Fargo and Fifth Third Bancorp have also announced wage increases.

 

Without this, from consumption, other weaknesses visible in the profile of growth in the third quarter might alter the continuing at the same pace. Stocks have accounted for much of the good performance of the economy (almost 0.8 percentage points of growth). However, this restocking is not always seen as a dynamic element of the activity, because these are all items that will not be produced for the next quarter, unless sales are exceptional. Not to mention the evolution of stocks, the growth in final sales — a figure that many consider to be an image more faithful to the health of the GDP — has slowed to 2.4 % instead of 2.9% in the second quarter.

 

The government will release on 26 January its initial estimate of GDP in the fourth quarter. The Atlanta Fed, predicted a growth of 3.3 % annual rate for the last quarter of the year, while the economists of Oxford Economics focus on the 2.8 %.

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