GDP: As Growth Slows To 1.9%, The Economy Is Falling Short Of Trump's Target GDP numbers out Wednesday show the U.S. economy lost some steam in the third quarter. President Trump is banking on a strong economy as his ticket to a second term.
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As Growth Slows To 1.9%, The Economy Is Falling Short Of Trump's Target

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As Growth Slows To 1.9%, The Economy Is Falling Short Of Trump's Target

As Growth Slows To 1.9%, The Economy Is Falling Short Of Trump's Target

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RACHEL MARTIN, HOST:

President Trump is counting on a strong economy to help him win reelection next year. But new numbers from the Commerce Department this morning show the economy lost steam during the summer and early fall. GDP grew at an annual pace of just 1.9% in the third quarter, well below the White House target. Here's NPR's Scott Horsley.

SCOTT HORSLEY, BYLINE: Weak economic growth in the third quarter follows a sluggish second quarter, when the economy grew at an annual pace of just 2%. At this point, it would take an economic miracle to achieve the 3.2% growth rate for the full year predicted in the president's budget.

DIANE SWONK: We won't get a three-plus percent growth rate for the year. That's not going to happen.

HORSLEY: Chief economist Diane Swonk of Grant Thornton says third-quarter growth was hobbled in part by temporary factors, including the strike at General Motors and the continued grounding of Boeing 737 MAX jets. But the slowdown also reflects a steady decline in business investment. The GOP tax cut was supposed to promote a surge in business spending, and the White House promised that would supercharge economic growth. But Swonk says many businesses have grown skittish in the face of weak demand overseas and the president's trade war.

SWONK: The uncertainty tax that we're paying with regard to trade - businesses don't know where to place their bets and don't know where to invest when they don't know where the next tariffs are going to come from. And so that's been one of the biggest weights on the U.S. economy.

HORSLEY: Despite the flashing warning signs, the president continues to boast about the economy, telling reporters during a Cabinet meeting last week it's his ticket to a second term.

(SOUNDBITE OF ARCHIVED RECORDING)

PRESIDENT DONALD TRUMP: Look, I have the strongest economy ever. It's the economy's stupid, right? I have the strongest economy in the history of our country.

HORSLEY: To be sure, the nation's unemployment rate is near a 50-year low. And as Trump noted earlier this week, the S&P 500 stock index just hit an all-time high.

(SOUNDBITE OF ARCHIVED RECORDING)

TRUMP: Does anybody have a 401(k) that's up?

(CHEERING)

TRUMP: Everybody.

HORSLEY: Other presidents have been wary of hitching their political fortunes to a volatile stock market, but economist Mark Zandi says Trump shows no such reservations.

MARK ZANDI: Of course, he only focuses when the market's up. But nonetheless, he's got his finger on something. The market matters a lot. It's a real-time barometer of how the economy is doing, and people perceive it that way.

HORSLEY: Zandi and his colleagues at Moody's Analytics have built a model that uses a variety of economic indicators, including the stock market, household income, unemployment and gasoline prices, to help predict the outcome of next year's presidential race. For now, Zandi says the economy is working in Trump's favor.

ZANDI: If the economy is performing a year from now roughly like it is today and his approval rating is roughly the same and, of course, if turnout is typical, then given the economics, he will win. He will win the presidency in 2020.

HORSLEY: Zandi says that could change, though, if the economic slowdown triggers a drop in the stock market or a jump in unemployment. A spike in voter turnout could also help Democrats, especially in the key battlegrounds of Michigan, Wisconsin and Pennsylvania. Zandi notes all three of those states have a lot of factories and farms, businesses in the crosshairs of the president's trade war.

ZANDI: Those are the industries that are actually suffering the most right now. So ironically, the president's trade war is doing the most damage to the economies of those states that will matter most to his reelection bid.

HORSLEY: If Trump's paying attention to that, Zandi thinks the president will find a face-saving way to avoid escalating the trade war. If not, he says Trump's own political stock could suffer as well. Scott Horsley, NPR News, Washington.

(SOUNDBITE OF GOGO PENGUIN'S "SMARRA")

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