President Trump was confident about GDP growth early in his term. In 2017, the President’s plan assumed a 3% annual growth rate, but by December 31st, the numbers came up short. Growth for all of 2017 tracked at 2.3%, despite some overperforming quarters.
It has been 12 years since the country achieved 3.3% GDP growth in 2005. With Trump’s sweeping tax changes now implemented (arguably the biggest financial differentiator of his term so far), we can look at 2018 as the first time that the current president has had full influence over the economy.
Tax Cuts Will Be the Leading Influence on GDP Growth
Businesses have been investing more money in 2017 and 2018. The benefits of this could come to fruition this year, adding to the economic output of the nation.
The only problem at this stage is that the ongoing trade disputes are eroding the kind of confidence that came with the tax cuts, so time could reveal whether trade policy has undone the excellent work that was started. If, however, confidence remains, then we could be looking at good figures by the end of 2018.
Even though the trade disputes are worrying, it’s still important to note that the corporate tax rate cuts were the first in 32 years. The investment that comes from such a massive change should not be underestimated.
Consumer spending is still responsible for 70% of economic growth in the United States, and mild tax cuts for families as well as falling unemployment figures could help to bolster the growth rate.
JP Morgan predicted a 3% GDP growth rate at the beginning of this year, and the American Bankers Association lifted their forecast from 2.4% to 2.8% recently. If we make it, it will be close, but there is confidence among analysts.
GDP Is an Important Figure for Investors
GDP growth matters for investors because it can influence stock market confidence, bonds, real estate, and other areas of investment within the economy. Despite trade war fears and stock market fluctuations throughout 2018, the economy is in good shape, and this hasn’t changed even at the lowest points of the investment market this year.
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