Good, mad and ugly: the US economy’s performance under Trump – in charts

Recent US economic data presents a chaotic picture, challenging administration claims of a booming economy. While Q2 GDP rebounded, overall H1 growth was mediocre at 1.2% with a 15.6% drop in private domestic investment, reflecting business uncertainty driven by trade policy. Imports surged then tumbled due to tariff anticipation, distorting GDP, while the Federal Reserve has resisted rate cuts due to inflation concerns. Crucially, the July jobs report revealed a significant slowdown in job creation, with prior months revised down by 258,000, indicating a stalled labor market.

Analysis

Recent US economic data presents a chaotic and contradictory picture, challenging the narrative of a booming economy. While second-quarter GDP showed robust headline expansion, this followed a first-quarter contraction, resulting in a mediocre 1.2% growth rate for the first half of the year. This volatility is largely a consequence of erratic trade policy, which prompted a pre-tariff surge in imports that suppressed Q1 growth, followed by a sharp drop in imports that artificially boosted Q2 GDP via net exports. More fundamentally, business uncertainty is reflected in a significant 15.6% drop in private domestic investment. The most concerning signal is the stalled labor market, evidenced by a weaker-than-expected July jobs report and a substantial downward revision of 258,000 jobs for May and June. This slowdown, combined with the Federal Reserve's decision to hold interest rates steady due to persistent inflation concerns and policy uncertainty, paints a picture of an economy facing significant headwinds and distortions rather than a clear, sustainable expansion.

Key Decisions for Investors

• Investors should look past the headline Q2 GDP figure, as it was significantly distorted by trade-related import swings, and instead focus on more fundamental indicators like the 15.6% drop in private investment and the stalled job growth.
• Given the high policy uncertainty and weakening labor market, consider reducing exposure to cyclical sectors that are highly sensitive to domestic economic health and business sentiment.
• Monitor the tension between the White House's demand for rate cuts and the Federal Reserve's cautious, data-dependent stance, as any shift from the Fed's 'wait-and-see' approach will have significant implications for fixed-income and equity markets.
• The unpredictable nature of trade policy remains a primary risk factor, warranting a cautious stance on companies with significant international supply chains or export dependency until a more stable policy environment emerges.