President Trump is heading into the thick of the 2020 reelection cycle with the strong breeze of a surging economy at his back.
The economy grew at an impressive 3.2% in the first quarter — the first time in six years that growth in the January through March period topped 3%. The burst was bolstered by rising exports, falling imports and higher inventory spending.
“America’s future has never been brighter,” Mr. Trump said at a campaign rally Saturday night in Green Bay, Wisconsin. “Yet the Democrats, those very ‘friendly’ people in Washington, have never been angrier than they are today.”
The combination of low inflation, rising wages and near-historic lows in unemployment could blunt the appeal, for now, of presidential challengers such as former Vice President Joseph R. Biden. The Democrat will hold his first big campaign event Monday in Pittsburgh to lay out his “vision for rebuilding America’s middle class,” his campaign said.
Biden spokeswoman Kate Bedingfield said Mr. Biden’s ability to raise $6.3 million in the first 24 hours of his campaign last week shows that Americans are ready, in part, for someone who can “rebuild the middle class so everyone gets a fair shot.”
But the Republican National Committee said the first-quarter report is proof that the economy, which grew 2.9% in 2018, isn’t slowing down.
“When voters ask themselves in 2020 if they’re better off now than they were four years ago, the answer will be a resounding ‘yes’ thanks to President Trump and Republican leadership,” said RNC spokesman Michael Joyce.
The economic performance, following disappointing growth rate of 2.2% percent in the fourth quarter of last year, came out strong despite a partial government shutdown that slowed some business activity for the first 25 days of 2019. The Commerce Department estimated that without the shutdown, first-quarter growth would have been 3.5%.
Economists who had predicted growth of 2.5% said the better-than-expected result is a positive sign for the rest of the year, at the very least.
National Association of Manufacturers chief economist Chad Moutray said the economy’s performance showed resilience in the face of “slowing global growth, the partial government shutdown, trade policy uncertainties [and] a strong U.S. dollar.”
“This was the strongest first quarter of growth since 2015,” he said. “The U.S. economy should now expand by around 2.7% in 2019 — an improvement from what I might have forecasted prior to this release.”
Economist Joel Naroff of Holland, Pennsylvania, said the first-quarter growth “does show that the economy is still in good shape and should remain that way for the rest of the year.”
Senate Finance Committee Chairman Chuck Grassley, Iowa Republican, said the report shows that “the U.S. economy under Trump is still running on all cylinders.”
The Dow Jones Industrial Average closed Friday at 26,543.33, near its all-time high.
There were fears that economic output could fall below 1% this year because of the combined impact of the trade war with China (which White House officials say is nearing a resolution), the precipitous decline in the stock market in December, a global economic slowdown and the partial government shutdown that ended Jan. 25.
But the U.S. economy bounced back, aided by an announcement from the Federal Reserve that it is suspending plans for more interest rate hikes, which were harshly criticized by Mr. Trump and prompted his effort to appoint two non-academics to the central bank’s governing board.
While Mr. Biden is arguing that the Trump economy is leaving behind certain groups, the president pointed out again Saturday night that the unemployment rate has reached historic lows for women, blacks, Hispanics and Asian Americans.
The president, who champions tax cuts and fewer regulations, said the first-quarter report on gross domestic product “smashed expectations.”
“Our economy is now the hottest anywhere on the planet Earth,” Mr. Trump said.
However, some economists see warning signs for 2020. Mr. Naroff said there is a “labor market bubble that will likely lead to rising wages, rising prices and falling earnings.”
“Unfortunately, the wage gains will not be enough to overcome the increasing inflation, and the increasing inflation will not be enough to offset slower demand domestically and globally,” he said. “There are more risks to the downside than the upside, and that means a slowdown in 2020. If, as I forecast, the unemployment rate starts rising next spring and continues to do so through the fall, the economy could become a major political issue.”
Megan Greene, global chief economist at Manulife/John Hancock Asset Management, said the first-quarter report looks good until “you look under the hood and kick the tires.”
“Inventory buildup will have to be unwound (which will drag on growth), imports were weak (everyone front ran the tariffs last year) and [defense] spending was strong (but rest of govt spending weak),” she tweeted.
Former Obama White House economic adviser Jason Furman said in a Twitter post that “the underlying data is much weaker and is consistent with a slowing economy.”
Consumer spending, which makes up more than two-thirds of economic output, moderated to 1.2% growth in the first quarter. Spending on durable goods fell 5.3%, the biggest drop in a decade, led by a sharp decline in light-truck sales.
Some economists said the robust growth will renew pressure on the Federal Reserve to raise interest rates. Mr. Trump has criticized the Fed for raising rates four times in 2018, saying it hurt growth in the fourth quarter and contributed to the stock market plummet in December.
The White House Council of Economic Advisers said the GDP report “likely underestimates the current pace of economic growth” for the year because the first quarter is typically the slowest of the year. It also said the full impact of the shutdown “cannot be quantified” and that factoring in those uncertainties implies an annual growth rate of 4.4%.
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