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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Trump hails US economy as GDP rises at fastest pace since 2014 - as it happened

The New York skyline.
The New York skyline. Photograph: Erik Pendzich/REX/Shutterstock

And finally, here’s a clip of president Trump’s comments on the US economy:

That’s a good moment to wrap up. Have a good weekend. GW

Snap verdict: president Trump is clearly taking today’s growth figure as vindication of his economic policies.

That means we can expect more of the same from the White House on trade, tax and spending.

Larry Kudlow, the president’s top economic advisor, now speaks -- and he backs up Trump’s claim that the US economy will keep growing strongly.

Kudlow insists:

This is a boom that will be sustainable.

Updated

Turning away from the economy, president Trump says that the remains of 55 Americans killed in the Korean war are returning to the US.

He thanks Kim Jong-Un for sticking to his commitment.

Onto trade...and president Trump criticises other countries for stealing US jobs and plundering its wealth.

Our tariffs are bringing tariffs back to the US, he continues, saying that the burly steel workers he met in Illinois yesterday were in tears (of joy, presumably).

Trump is insisting that his hard line on trade will bring jobs back to America (reminder: his administration is working on a $12bn bailout for US farmers hurt by the row with China)

Giving his own trumpet a hearty toot, president Trump now says that his administration have achieved an “economic turnaround of historic proportions”.

We are the envy of the entire world, he adds, saying that other world leaders are regularly congratulating him on the state of the US economy.

Trump speaks on the economy

President Trump is speaking on the economy now at the White House.

He says today’s numbers are “great”, and that America is going to go a lot higher.

We’re on track for the fastest growth rate in 13 years, the president declares.

The US economy is growing much faster than under the previous two administrations, Trump continues.

If the current growth rate is maintained, the US economy will double in size 10 years faster than it would have done under presidents Bush or Obama, Trump claims.

He also points out that the trade deficit has dropped by over $50bn.

Trump insists that the current growth rate is sustainable, and not a single shot boost (some analysts disagree, though)

Updated

We have the official thumbs up from the White House:

Even if this pacey growth doesn’t last, it gives Donald Trump a boost going into the mid-term election this autumn.

However, the feelgood factor could face if trade wars hurt the US economy in the coming months.

Balraj Sroya, Sales Trader at Foenix Partners, explains:

The words ‘Make America Great Again’ can be heard echoing from across the Atlantic this afternoon as the US economy grew 4.1% in the second quarter of 2018, which is the most robust pace in nearly 4-years.

Strong export figures, aided by soybean exports in addition to consumer spending, helped the surge in the GDP print.

Over the next quarter GDP figures will be scrutinised, as the threat of upcoming tariffs on US exports could dampen the next print. However, it gives Republicans a firm footing ahead of the Midterm elections, as GDP sitting above 3% has been a core pledge for the Trump administration since the beginning of his campaign.

Full story: US growth hits higher since 2014

Our US business editor, Dominic Rushe, writes:

The growth will be a major boon for the Trump administration, which pushed through $1.5tn in tax cuts at the start of the year with a promise that they would be paid for by economic growth.

Ahead of the announcement on Thursday, Donald Trump teased that good news could be coming. Breaking with a tradition of presidents refraining from commenting on market sensitive government releases ahead of their release, the president told a rally in Illinois: “Somebody actually predicted today 5.3 [percent growth]. I don’t think that’s going to happen ... if it has a four in front of it, we’re happy.”

But economists warned the growth spurt may be unsustainable and the evidence so far is that the benefits of the mini-boom have disproportionately gone to the wealthiest Americans.

The last time the economy expanded at a comparable pace was in 2014, when growth hit 5.2% in the third quarter.

The economic boost was driven by rising consumer spending, exports and business investment over the quarter.

More here:

Analyst: Trump tax cuts are driving growth

Here’s Rob Hodgson, Senior Wealth Manager at GWM Investment Management, on the US GDP figures:

“Donald Trump’s Chief Economic Adviser told us it was going to be ‘big’ and it’s fair to say that analysts were projecting some exciting figures.

A 4.1% growth rate in Q2 is the strongest since the third quarter of 2014. Projections were ranging between 3 and 5 percent and business confidence remains upbeat so we were expecting a strong quarter of growth.

We would suggest that 4.1% overstates the underlying pace of activity, but the tax cuts and impacts of deregulation are likely to keep economic growth accelerating from this point.”

As this chart shows, America has just posted its strongest quarter since Donald Trump became president.

However, growth was still stronger in the middle of 2014, during Barack Obama’s second term.

US growth
US growth Photograph: CEBR

Nancy Curtin, chief investment officer at Close Brothers Asset Management, says Donald Trump’s tax reforms have spurred US growth in recent months:

“The US economy is showing the fastest growth since 2014. A strong labour market, benign inflation and strong corporate investment have contributed to this positive landscape for growth.

The economy was already on the up before Trump’s tax cuts added further fiscal fuel. The tax cuts are now filtering through to the real economy as companies have been empowered to increase investment spend, the lion share of which is going into technology and automation.

Pablo Shah, economist at the CEBR think tank, says America’s growth rate was impressive in the last quarter:

While much of the resurgence in US growth can be attributed to somewhat transitory factors, today’s figures remain impressive.

A strong labour market coupled with accommodative fiscal and monetary policies are set to sustain solid growth throughout the remainder of the year.

However, he also suspects growth will fade over time:

The US economy is likely to come off the boil in the coming quarters, as the boost to growth delivered by the tax cuts begins to wear off, trade restrictions and an overall slowing of the global economy start to weigh on exports, and further interest rate hikes tighten financial conditions.

The dollar has dipped slightly, despite America’s growth rate jumping.

That suggests investors don’t think this growth rate is sustainable.

US consumers drove America’s US economic growth in the last three months.

Consumer spending grew at an annual rate of 4% in the last quarter, up from just 0.5% in January-March.

Business investment was 7.3% higher.

Exports grew by 9.3%, while exports only expanded by 0.5% -- that will please the White House.

US economic growth jumps to 4.1%

NEWSFLASH: America’s economy grew at an annual rate of 4.1% in the last three months, as growth accelerated.

That’s the fastest growth rate since 2014, and a very solid result (although not as high as some economists had hoped).

It may show that Donald Trump’s tax cuts have given the economy a boost.

US growth in January-March has also been revised up, to an annual rate of 2.2% from 2%.

That’s a lot stronger than France, which grew at an annualised rate of 0.8% in the last quarter (or 0.2% quarter-on-quarter)

More to follow!

Updated

It’s nearly time to discover how fast America’s economy grew in the last quarter.

Forecast range from an annualised growth rate of 2.6% all the way up to 4.8%, which would be very pacy.

First Facebook’s shares tumble after missing Wall Street forecasts, then Twitter follows suit.

So has the social media boom hit a roadblock, or are investors simply over-reacting? Arguably, Wall Street should welcome signs that these companies are getting serious about tackling abuse, fake accounts and disinformation, even if it hits the bottom line.

Neil Wilson of Markets.com says there are two theories why shares are tumbling:

One, expectations for revenue growth are being fundamentally reset in the social media space. Two, today’s reaction is maybe overdone as investors have been spooked by the horrid earnings call from Facebook. Everyone knew that Twitter was full of fake accounts – why their removal should be impacting the share price in the way is unclear – investors may be better advised to keep a check on earnings and revenue growth instead.

Both Facebook and Twitter have been affected badly by fake news, fake accounts and accusations of Russian meddling. But arguably Twitter looks in better shape as the efforts to monetise the platform are working, whilst we see fundamental concerns about Facebook’s advertising model.”

Twitter says it is determined to tackle ‘problem behaviour’, even if it does hurt user numers.

It tells shareholders:

“We are making active decisions to prioritize health initiatives over near-term product improvements that may drive more usage of Twitter as a daily utility.”

Some snap reaction to Twitter’s results:

Twitter shares plunge as results disappoint

NEWSFLASH: Twitter has just reported that its user numbers have fallen, as it got to grips with fake accounts.

The social media/micro-blogging site says monthly users fell by one million in the last three months, to 353 million. Wall Street had expected a rise of one million.

Twitter took steps to weed out abusive content providers, and so-called ‘bots’, to (finally) address concerns from regulators, politicians and the public.

But investors aren’t impressed, even though twitter also posted earnings of around $100m or $0.17 per share, in line with forecasts.

Shares have slumped by 18% in pre-market trading, matching Facebook’s tumble earlier this week.

City traders, mortgage holders, savers and borrowers all need to be alert for a UK interest rate rise next week.

The Bank of England sets monetary policy next Thursday, and a rate rise is possible - but not certain. There are arguments to hike, but also to sit tight a bit longer.

As Nicholas Wall of Old Mutual Global Investors puts it:

For a nation that has endured the trials and tribulations of Love Island over the summer, the original unreliable boyfriend returns next week. Will the Bank of England governor Mark Carney deliver the 0.25% rate hike that the market expects?

Here are Wall’sa rguments for a rate hike:

  • Growth may not be that strong, but is reasonable considering the reduced growth potential post-crisis
  • Strong retail sales and manufacturing data (PMIs)
  • High job creation

While here are three reasons not to:

  • Brexit uncertainty, which is likely to intensify this autumn
  • Trade war fears - as America threatens China with new tariffs
  • Weak real wages, with earnings only slightly ahead of inflation

France’s weak growth this year could mean Paris misses its deficit reduction targets, and push the national debt higher, says economist Emanuele Canegrati:

That would be problematic for president Macron as he tries to push for eurozone reforms. Germany will be less receptive of more risk-sharing between euro members if the bloc’s second-largest member is struggling.

Updated

Global stock markets remain upbeat, as traders count down to 1.30pm BST...when we learn how America’s economy fared in the last quarter.

Ken Odeluga of City Index says Wednesday’s peach deal between the US and EU on trade is helping, as are recent financial results.

In Europe the stream of earnings is picking up, with a set of pleasing if not spectacular reports on Friday.

The car sector remains in sharp focus as an epicentre of the trade conflict on this side of the Atlantic and after the apparent stay of execution due to EU-U.S. rapprochement. With Britain’s FTSE, Germany’s DAX, Italy’s MIB all just slightly higher and Paris’s CAC slightly soft, the atmosphere is constructive for further potential strength though lacks catalysts.

In the currency markets, the pound has dropped back below $1.31 against the dollar.

Sterling weakened after Brussels’ negotiator Michel Barnier gave Theresa May’s ‘Chequers Plan’ a punch in the solar plexus.

Barnier rejected the UK’s idea of collecting tariffs and duties on goods entering Britain and heading into the European Union, saying that the EU must keep control of its money and borders (sound familiar?....)

France’s economy has been a tale of two halves in the last year, as economist Shaun Richards points out.

Christopher Dembik of Saxo Bank fears the French economy is facing a negative shock:

Here’s our energy correspondent, Adam Vaughan, explaining why BP will be pleased to have acquired BHP’s Billiton’s US shale assets...

The deal gives BP a much bigger footprint in oil-rich onshore basins and was described by its chief executive, Bob Dudley, as a “transformational acquisition”

...and why BHP will be delighted to have got rid of them:

BHP first acquired shale assets in 2011 for more than $20bn with the takeover of Petrohawk Energy and shale gas interests from Chesapeake Energy Corp, but suffered as gas prices collapsed, forcing it to book massive writedowns.

“It was the wrong environment to have bought the assets when they did but this is the right market to have sold them in,” Craig Evans, the co-portfolio manager of the Tribeca Global Natural Resources Fund, said.

This chart, from INSEE, shows how France’s growth rate slowed in the last six months, after a solid 2017:

French GDP
French GDP Photograph: INSEE

A TSB branch

The IT meltdown at Britain’s TSB bank has hurt its parent company, Sabadell, rather badly.

Sabadell reported this morning that it tumbled into the red in the last quarter, losing €138.7m in April-June.

That period was a nightmare for TSB, and its customers, when an IT migration to a new platform went disastrously wrong, locking customers out of their accounts for days (and in some cases weeks).

Sabadell has taken a one-off charge of €203m for the outage, a bigger hit than expected, to cover compensation and lost business.

TSB CEO Paul Pester was heavily criticised for his handling of the crisis. He has told reporters this morning that he plans to stay at the bank, and is “100 percent focused” on putting things right.

France’s weak growth figures haven’t alarmed investors.

European stocks have opened higher with the FTSE 100 gaining almost 0.3%. The French CAC is 0.2% higher too.

European stock markets in early trading
European stock markets in early trading Photograph: Thomson Reuters

In London, consumer goods group Reckitt Benckiser has surged by 9%. It raised its annual revenue growth target on Friday, following strong growth in its child nutrition business.

Telecoms group BT is also leading the risers, up 3% after posting a 3% rise in adjusted profits.

European stocks are benefiting from the drop in the euro on Thursday. It shed almost 1% to $1.164, after the European Central Bank sounded dovish about interest rate hike prospects.

Here’s Claus Vistesen of Pantheon Macroeconomic on the French GDP figures:

Bloomberg says those French growth figures are a disappointment:

The euro area’s second largest economy had a rough start to the year, when it, along with much of Europe, saw output strangled by bad weather and snowstorms. While there’s been a general loss of momentum across many economies this year, France’s slowdown was exacerbated when rail workers staged industrial action to protest President Emmanuel Macron’s reform plans.

The continued sluggishness in France is a handicap for the euro area amid a period of uncertainty marked by global trade tensions and the prospect of European Central Bank paring back its vast monetary stimulus.

BP grabs US shale assets in $10.5bn deal

A BP petrol station sign in Essex.

Important energy news: oil giant BP is buying US shale oil and gas assets from mining group BHP Billiton, in a $10.5bn deal.

It’s a major deal for BP - its biggest in around two decades, giving it a much more powerful position in the US energy sector.

CEO Bob Dudley says:

“This is a transformational acquisition for our Lower 48 business, a major step in delivering our upstream strategy and a world-class addition to BP’s distinctive portfolio.

Effectively BP is catching up the ground it lost after the Deepwater Horizon disaster, in which 11 workers died when their rig in the Gulf of Mexico caught fire.

Shares in BHP Billiton have jumped over 2% at the start of trading in London -- analysts had only expected these assets to sell for $8-$10bn. BP are down 2%.

Economist Philippe Waechter of Ostrum Asset Management says France’s GDP new figures are disappointing.

It may mean Emmanuel Macron’s government will fail to hit its growth targets this year.

Updated

French factories had a lacklustre quarter, with goods production falling in the last three months.

INSEE says:

Production in goods and services barely accelerated in Q2 2018 (+0.2% after +0.1%). It fell back again in goods (−0.3% after −0.6%) while it continued to grow in services (+0.4% after +0.3%).

Output in manufactured goods fell back again (−0.2% after −1.0%). Production in refinery stepped back (−9.9% after −1.6%) due to technical maintenance; production in electricity and gas dropped too (−1.7% after +1.9%). However, construction bounced back (+0.6% after −0.3%).

INSEE: Strikes hurt GDP

Striking French railway workers hold banners and placards as they gather in front of Matabiau Station in Toulouse on April 17, 2018, during a strike day against rail reform.
Striking French railway workers hold banners and placards as they gather in front of Matabiau Station in Toulouse on April 17, 2018, during a strike day against rail reform. Photograph: Eric Cabanis/AFP/Getty Images

A wave of strikes by French railway workers and Air France employees hurt growth in the last quarter, it seems.

Stats body INSEE blames industrial action across the French transport system for a big drop in transport spending.

It says:

In services, the slow down was notably driven by the downturn in transport expenses (−3.2% after +1.0%), mainly in rail transport as a result of strikes.

French rail workers walked out for 26 days between April and June, as part of protest against reforms to the SNCF rail company. This caused disruption to national services, and routes within Paris.

Updated

Introduction: French GDP rose just 0.2% in Q2

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

France’s economy has failed to accelerate.

New growth figures show that the eurozone’s second-largest economy only grew by 0.2% in the second quarter of 2018.

That only matches the slow performance seen in the first three months of 2018, and is weaker than the 0.3% which economists expected.

The data highlights how Europe has lost momentum this year, after a rollicking 2017.

INSEE, the statistics body, says household spending fell in the last quarter.

Trade also held back growth, with imports growing faster than exports:

Household consumption expenditures faltered slightly (−0.1% after +0.2%), whereas total gross fixed capital formation recovered sharply (GFCF: +0.7% after +0.1%). Overall, final domestic demand excluding inventory changes contributed as much to GDP growth as in Q1 (+0.2 points).

Imports bounced back this quarter (+1.7% after −0.3%) as did exports to a lesser extent (+0.6% after −0.4%). All in all, foreign trade balance contributed negatively to GDP growth, −0.3 points, after a neutral contribution in Q1. Conversely, changes in inventories drove GDP on (+0.3 points after 0.0 points).

More details to follow...

Investors are also desperate to learn how well America’s economy performed in the last quarter.

US GDP, due at 1.30pm UK time is likely to show impressive growth, as president Trump’s tax cuts stimulate the economy.

White House economic adviser Lawrence Kudlow told the markets to expecting a “very good” number - that could mean an annual growth rate over 4%.

Also coming up today

Amazon has brought some calm to the markets last night by beating profit forecasts.

The e-commerce giant racked up record revenues in the quarter, and made twice as large a profit as investors expected.

On a conference call with investors, Brian Olsavsky, the company’s chief financial officer, cited growth in Amazon’s “most profitable areas”, particularly the cloud-computing division, Amazon Web Services (AWS).

Olsavsky also pointed to the company’s advertising products as contributing to gross profit while “growing at a rapid clip”

That made up for Facebook’s shocking performance a day earlier, which prompted the biggest one-day loss in Wall Street history.

The agenda:

  • 6.30am BST: First estimate of French GDP in the second quarter of 2018
  • 1.30pm BST: First estimate of US GDP in the second quarter of 2018

Updated

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