The U.S. economy slowed in the spring, falling to a level that most economists consider healthy but that President Trump has often declared inadequate.

The economy grew at a 2.1 percent annual rate in the second quarter, a downgrade from the first quarter’s surprisingly strong 3.1 percent pace and setting the stage for what could be a more tepid pace of growth the rest of the year.

The middling results could pose a problem for Trump, who promised the economy could grow at 3 percent – or higher – every year during his tenure and is making the economy a centerpiece of his re-election campaign.

Still, Trump described Friday’s report as “not bad” and predicted that the economy is “set to zoom.” But many economists say the nation appears to be settling back into a level of just over 2 percent annual growth, which they describe as solid but not extraordinary, since it has been the norm for much of the recovery.

“Last year was a fiscal sugar rush. This year it’s starting to fade,” said Michael Feroli, chief U.S. economist at J.P. Morgan, referring to the combination of tax cuts and spending increases that had goosed growth.

Trump boasted widely that he achieved his growth target last year, but he suffered a disappointment Friday when the Commerce Department revised the growth figures down for part of last year, meaning Trump has yet to achieve a full year of 3 percent growth during his tenure.

Trump’s tone Friday was softer than the one he used on the campaign trail when he criticized President Barack Obama for being “the first president in modern history not to have a single year of 3 percent growth.”

Last quarter, the economy was helped by a surge in consumer and federal government spending, but business investment turned negative for the first time since early 2016.

Many executives blame uncertainty around Trump’s trade war for their hesitancy to spend as much as they did a year ago. The plunge in corporate spending has been especially evident in the manufacturing sector, which fell into a “technical recession” in the first half of the year as equipment purchases dried up.

Trump has attempted to boost the economy with an amount of stimulus unprecedented in good economic times, by beefing up military and domestic spending, scaling back regulations and enacting a large tax cut that included the biggest reduction in corporate taxes in U.S. history.

In total, Trump is spending about $4 trillion over the next decade, according to the Committee for a Responsible Federal Budget. There remains heavy debate about whether the additional expenditures resulted in a different economy.

“We spent a lot and didn’t get a lot of growth out of it,” said Gregory Daco, chief U.S. economist at Oxford Economics. “We got a one-time boost to growth to about 3 percent, but it wasn’t sustainable. It didn’t increase business investment for the long term.”

The tax cut for businesses was supposed to spur companies to invest in new properties, equipment and products, but after a bounce early last year, businesses have pulled back on spending. Non-residential fixed investment fell sharply to minus 0.6 percent during the quarter, and spending on new structures plummeted to minus 10.6 percent. Alongside concerns about trade, the sharp decline in production of the Boeing 737 Max commercial jetliners after two deadly plane crashes likely played a role in the drop in business investment.

The White House argues that Trump’s policies have enabled millions more Americans to get jobs and receive higher pay through tax cuts and a strong labor market that has forced companies to boost wages. That, in turn, has helped raise consumer spending, said Larry Kudlow, Trump’s chief economic adviser.

The economy has added 5.6 million jobs since Trump took office, a level that is slightly below the end of the Obama presidency but considered very strong given that the expansion has been underway for more than a decade. Many Americans, especially people of color and those with criminal records, have been able to find jobs in the past two years.

Kudlow called consumers “heroes” on Friday and blamed the slowing economic momentum on the Federal Reserve, which raised interest rates four times last year and has been a nearly constant target of Trump’s ire.

“We had to suffer through severe monetary tightening,” Kudlow said on CNBC. But he predicted a strong second half of the year. “We are the hottest economy in the world, and I expect us to stay that way.”

Kudlow’s remarks echoed Trump’s tweet that growth was “not bad considering we had the very heavy weight of the Federal Reserve anchor wrapped around our neck.”

The Fed is almost certain to lower interest rates at the conclusion of its policy meeting next week, but the central bank has been hinting since early June that the cut is coming, which many say is a key reason that stocks hit record highs again and business sentiment has rebounded somewhat.

“In many ways, we’ve already reaped the benefits of a Fed cut,” said Diane Swonk, chief economist at Grant Thornton. She pointed to higher stock prices, more mortgage refinancing and a rebound in spending as evidence that the Fed’s more “dovish” stance has had an impact.

The White House has discussed ways to potentially boost the economy further, including possibly trying to devalue the U.S. dollar to make American goods more competitive overseas. But Kudlow said that was ruled out.

Few are predicting a recession anytime soon. The nation is in the midst of the longest expansion in U.S. history, growing for more than a decade and exceeding even the 1990s boom. While some have questioned how much longer the expansion can last, it is showing little sign of weakness. Most experts say it would take a major event of some sort to knock the economy off course.

“Expansions don’t die of old age. I like to say they get murdered,” Ben Bernanke, an economist and former Fed chairman, said earlier this year.

The bearish case is that businesses are pulling back on spending, and if that spills over to a pullback in hiring, that could spook consumers and prompt them to close their wallets. But many forecasters do not see that scenario as likely in the next year.

If the economy continues to grow at or slightly above a 2 percent rate, that should be enough to justify adding more jobs and increasing pay for many workers, which fuels consumer spending.

More than half the country – 53 percent – rate the economy as “excellent” or “good,” according to a Gallup poll conducted earlier this month, a level of approval not seen since early 2001. Trump touted a Fox News poll this week showing similar results, with 51 percent of registered voters rating the economy favorably.

The International Monetary Fund predicted this week that the U.S. economy would grow at a 2.6 percent pace this year, and the Fed anticipates 2.1 percent growth.

“I don’t see any warning signs right now,” said Ben Herzon, executive director of U.S. economics at Macroeconomic Advisers. “It’s hard to be against the economy when the consumer is in such good shape.”


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