Why The 'Trump Bump' Hasn't Happened

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The Trump administration's promise to turbocharge economic growth has yet to be fulfilled, even though forecasters are predicting that the economy has rebounded from a weak 1.4 percent annual growth rate in the first three months to a rate closer to 2.8 percent. That is the number many economists are expecting to see when the government issues its report on second-quarter growth on Friday.

Second-quarter growth could get close to the 3 percent annual rate the Trump administration says it can produce, but economists say that is unlikely to be sustained. Typically, the economy performs better during the second quarter, as people wake up from their winter torpor and start spending during the spring. And brief periods of strong growth are not unusual. In the final four years of the Obama administration, there were five quarters in which growth surpassed the 3 percent annual rate.

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One reason that strong second-quarter growth won't be considered a "Trump bump" is that so far, the president hasn't managed to implement the policies he said would ignite faster growth. The president's promised tax cuts have been stalled by the long debate over health care. Hopes of having a big tax overhaul before Congress' August recess have been replaced by a determination to get it done by the end of the year. And now there is talk of settling for a smaller, simpler tax cut for corporations and individuals.

Wells Fargo chief economist John Silvia says a tax package would likely boost economic growth by two-tenths or three-tenths of a percentage point.

A big infrastructure bill aimed at improving things like roads, bridges and ports was going to be the other source of fuel for Trump's economic boom, but that seems to have fallen far down the list of Washington's priorities.

Another potential lift to growth might have come from the jump in consumer sentiment after Trump's election. But the University of Michigan consumer expectations index shows enthusiasm fading to levels below where they were last November. Not surprisingly, growth in retail sales has also been declining.

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To measure the economy's vibrancy, Silvia says, the number to watch in Friday's gross domestic product report is the level of consumer spending. He is anticipating a rebound. "I suspect that is going to be the No. 1 story behind the second-quarter GDP," Silvia says. Personal consumption accounts for about 70 percent of overall economic activity, so it's key to understanding where the economy is headed.

Another element of the GDP report to watch closely is the level of inflation, which is how fast prices of goods and services are rising. The Federal Reserve closely follows the measure of inflation in the GDP report.

Most recently it has been below the Fed's 2 percent target, a matter of concern for the central bank. That target level is one the Fed considers optimal for a healthy economy.