JUDY WOODRUFF: Today, the U.S. Commerce Department released its latest snapshot of the American
economy.
As Amna Nawaz explains, the report showed that the U.S. economy, measured by the country's
gross domestic product, or GDP, grew at an annual rate of 4.1 percent from April through
June of this year.
That is the strongest quarter of growth since 2014.
AMNA NAWAZ: Judy, that growth came as the president was threatening to impose more tariffs
and in the wake of tax cuts from the past year.
Joining me now to dig into what this all means and why it's happening is David Wessel.
He's the director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings
Institution.
He is also a contributing correspondent to The Wall Street Journal.
David Wessel, welcome back to the "NewsHour."
DAVID WESSEL, The Wall Street Journal: Good to be with you.
AMNA NAWAZ: So, put that number into context for us.
We heard the president touting it earlier, 4.1 GDP growth.
What does it mean?
DAVID WESSEL: It means that we produced a lot more stuff and there was a lot more income
in the second quarter.
It's a very good quarter.
Almost everything we care about in this report was pointing up, with the only exception of
housing construction.
It's not quite as unprecedented as the president likes to suggest.
We actually had four quarters in the Obama administration where growth was more than
4.5 percent.
But it's undoubtedly good news.
AMNA NAWAZ: So, presidents before him hit in past administrations.
But, this time, let's talk about some of the contributing factors.
Trade.
We have heard a lot about the president's trade wars.
In this case, exports actually served, up 9.3 percent.
How should we understand that?
DAVID WESSEL: Right.
Well, presidents always get more credit or blame for the economy than they deserve.
In this case, I think the president gets credit for two parts of this.
One was the tax cuts are boosting spending in the economy, maybe boosting business investment.
That's what you expect.
But you're absolutely right.
It looks like there was a big surge in U.S. exports, particularly soybeans to China, because
importers there are trying to avoid the tariffs that China's imposing to counter Trump's tariffs.
So this was an unsustainable one-quarter boost in exports, particularly of farm stock, that's
not going to repeat.
AMNA NAWAZ: Well, you say unsustainable.
So China, we know, had placed that 25 percent tariff just on soybeans, right?
Actually, they're up 50 percent, soybeans from May of this year before -- from May of
last -- of the previous year.
Is there a counterbalancing dip now on the back end?
DAVID WESSEL: Yes, absolutely.
AMNA NAWAZ: For sure?
DAVID WESSEL: It's highly likely that that will not continue, that trade will be a drag
in the third quarter.
AMNA NAWAZ: OK.
Talk to me about the tax cuts.
Now, government spending was also up in this last quarter.
DAVID WESSEL: Right.
AMNA NAWAZ: What kind of factor did that play?
DAVID WESSEL: Well, the tax cuts play some factor.
We know that, when you cut people's taxes, they spend more money.
Business investment spending has not been great, but it's up a little bit.
And that's probably in part because of the tax cuts.
Federal government spending is up.
You're right.
That was mostly defense.
And defense tends to bounce around a lot quarter to quarter.
One thing that's interesting is state and local government spending, which is more money
than the federal government, is not increasing.
It's been very, very sluggish.
AMNA NAWAZ: There's another economic indicator I want to ask you about, household savings.
DAVID WESSEL: Right.
AMNA NAWAZ: We know these are estimates we get, right, when we get the GDP numbers.
They often go back and revise them.
Household savings is something we have had a recent revision on.
What does that tell us?
DAVID WESSEL: Right.
I think that may be one of the most striking things in this report.
The government went back and reestimated a lot of the numbers over the last couple years.
They always do this as they get more data, more details from tax returns and stuff like
that.
They said that American saved twice as much in 2017 as had been previously estimated.
And what that means is that there was a lot of concern that, if consumers and households
hadn't saved very much money, they would be reluctant to spend in the next six months,
in a year.
But that fear has really gone away.
It turns out households have built up their savings a little bit.
It's obviously upper-end households more than lower-end households.
And that gives people more confidence that the consumer spending that we have seen in
this quarter could continue.
AMNA NAWAZ: So, for those average households, the GDP conversation can be so abstract sometimes.
What do these new numbers today, this 4.1 percent, what does it mean?
DAVID WESSEL: Well, one thing is, when the economy grows strongly, businesses tend to
hire.
That means more people get jobs.
And that's why the unemployment rate has come down so far at a 17-year low.
But the GDP report doesn't tell us how the pie is sliced.
It tells us that the pie is getting bigger, if pies can get bigger.
But it doesn't tell us how the pie is being sliced.
And we know from other data that it's not being sliced evenly.
Most of the growth we have had recently has disproportionately gone to people at the top.
And wages of average people are not keeping up with inflation.
AMNA NAWAZ: At the same time, the president deserves credit for this strong growth so
far.
DAVID WESSEL: No, I would say the president gets credit for it.
And the perverse reaction to his trade war boosted growth in the second quarter, and
the tax cuts probably helped.
David Wessel, thank you so much for your time.
DAVID WESSEL: You're welcome.