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Ernie Tedeschi
Real GDP growth accelerated 1.9 percentage points between Q2 and Q1 (4.1% growth versus 2.2% growth). Most of that acceleration was due to consumption and exports. Nonresidential investment actually **decelerated**.
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Ernie Tedeschi 27 Jul 18
Replying to @ernietedeschi
In other words, the structural story of the tax cuts -- firmer investment growth -- didn't happen this quarter.
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Ernie Tedeschi 27 Jul 18
Replying to @ernietedeschi
Note too that in the end, the tariffs didn't juke the topline stats as much as expected: the one-time boost to GDP from export acceleration was more than washed out by the headwinds from inventory reduction.
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Ernie Tedeschi 27 Jul 18
Replying to @ernietedeschi
In other words, one story that fits the data is that firms didn't ramp up new production in anticipation of the tariffs, they just rushed to export their existing inventories. Doing this has a net impact on GDP of zero from an accounting standpoint.
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Ernie Tedeschi 27 Jul 18
Replying to @ernietedeschi
Also, motor vehicle purchases alone contributed 0.55pp to that 1.9pp Q1-Q2 acceleration. Wonder if part of that was also a rush to beat the tariffs.
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Ernie Tedeschi 27 Jul 18
Replying to @ernietedeschi
So all of that is a long way of saying that while this was undoubtedly a "good" report insofar as growth was large and driven by consumption, I'm skeptical that the drivers of growth this quarter can be sustained going forward.
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Allan Renz 27 Jul 18
Replying to @ernietedeschi
Could the exports have been accelerated because of pending tariffs?
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Ernie Tedeschi 27 Jul 18
Replying to @allanrenz
Almost certainly! But it looks like what happened is, rather than ramp up production before the tariffs hit, firms fell over themselves to export inventories they already had in stock. So in the end, the tariffs didn't have much of a net impact on the topline number.
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This is the end of my presidency. 27 Jul 18
Replying to @ernietedeschi
Can't wait for rate increases based on smoke and mirror "growth".
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Skanda Amarnath ( Neoliberal Sellout ) 27 Jul 18
Replying to @ernietedeschi
Energy continues to be the main driver from within. I’m sure the tax law helps the sector but most of that capex was gonna happen regardless
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