Escaping The Post-Crisis Growth Rut Is Indisputably Driven By Trumponomics

July 26, 5:00 pm EST

Tomorrow we get the second quarter GDP number. We’ve gone from a consensus view that didn’t believe in the economic momentum, or in the value of fiscal stimulus, to a consensus view that is now looking for more than 4% annualized growth for the second quarter. The switch has flipped in just the past few months.

As a goal for the economy, we hear the 3% growth number thrown around quite a bit. That’s right around long-term trend growth (trend growth is a little higher). But the GDP report that gets the most attention is a quarterly annualized number, which is more of a reflection of what the economy would look like if we moved forward over the next few quarters with similar economic activity. That can be a very volatile number. And we can see big numbers, in good economies and in bad economies. This is where the politicians like to find ambiguity to argue over. The pro-Trumpers will say we’re growing at 3%, something Obama never achieved. And the Obama defenders will point to several 3%+ annualized quarters in the Obama era.

What’s more informative is the average annualized growth over the past four quarters. That’s where you can see smoother trends and considerable improvements in the Trumponomics world.

On that note, we may finally hit that 3% number tomorrow. If the GDP number comes in tomorrow at the Atlanta Fed’s expectations (4.5%), we will have the hottest growth since June 2006.

A 4.5% second quarter number would put the four-quarter average annualized growth at 3.175%–the highest since the pre-financial crisis days. You can also see in the chart, the steady improvement in growth since the election, first driven by the optimism of pro-growth policies, and now driven by policy execution, as deregulation and tax cuts are working through the system.

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