The “blockbuster” economic growth in the first quarter is “absolutely” sustainable, Kevin Hassett, an economic advisor to President Donald Trump, said Friday on CNBC.
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First-quarter gross domestic product grew by 3.2%, according to an initial reading by the Bureau of Economic Analysis of the economy for that period. It was more than expected and was the first time since 2015 that first-quarter GDP topped 3%.
Hassett, chairman of the Council of Economic Advisers, said that the Trump administration had already been forecasting 3.2% economic growth for this year.
“Maybe we would revise it up,” he said on “The Exchange, referring to the 2019 forecast. “The [first-quarter] number was three-tenths lower because of the government shutdown and … the first quarter tends to be low because the winter weather isn’t really accounted for right in the statistics.”
“You add that all together, this is really blockbuster news and suggests that the risks on the upside are very high for GDP this year,” he added.
The surge in growth was driven by a smaller trade deficit and the largest accumulation of unsold merchandise since 2015. Those are both seen as temporary boosters that could ultimately weigh on the economy later this year. Because of that, Morgan Stanley economists are forecasting that GDP will slow to 1.1% in the second quarter.
Hassett agreed that when there is a lot of growth in inventories, it should give people pause about the next quarter. However, he said in this case there is no need for concern.
“Incomes are growing at a very high rate and consumption has not been,” he said. “Our expectation is that the shelves are being filled but they’re going be emptied out and production isn’t going to go down they way it normally does when you get an inventory spike.”
“The consumers are having their consumption catch up with income,” he added.
Hassett isn’t the only Trump administration official taking a victory lap. Earlier Friday, National Economic Council Director Larry Kudlow called the 3.2% GDP growth “a blowout number.” However, he still insisted the Federal Reserve should cut interest rates.
“The inflation rate continues to slip lower and lower,” Kudlow told CNBC’s “Squawk on the Street” on Friday. “Even according to the Fed’s own spokespeople, from the chairman on down, that could open the door to a target rate reduction.”
— CNBC’s Michael Sheetz and Reuters contributed to this report.