Econ Course Correction, Trump’s Reaction & Saving Rays – Top 3 Takeaways July 31st, 2025
Takeaway #1: Course correction
The GDP Report on Wednesday was about as good as anyone including President Trump could have hoped for it to be. Not only did the 3% growth rate blow away Wall Street expectations (2.3%), and even the Atlanta Federal Reserve’s recently elevated expectations (2.9%), it also came with the added bonus of significantly less consumer inflation. As I mentioned on May 1st after the first quarter GDP Report showed negative economic growth... The way that GDP is calculated is a wonky thing and without getting into too much wonkiness it’s like this. Imports are subtracted from GDP growth – meaning the more imports the country has the lower the GDP growth. In other words, if all other things are equal, importing more stuff leads to negative GDP but it doesn’t actually mean that the economy in the real world is shrinking. And that’s almost entirely what’s to blame for what made headlines for a negative first quarter economy. Anticipating future tariffs, businesses imported stuff at an unpreceded rate in the first quarter. And on that note, what we saw was a course correction with a decrease in imports in the second quarter following the build of inventories in the first quarter, which aided GDP growth this time around. So, the bottom line is that the economy wasn’t bad in the first quarter and great in the second quarter. Instead, it’s been a steady grower throughout the first half of the year. It’s precisely what I projected would happen three months ago. Most encouraging within the report was the significant decline in one of the most important inflation metrics. What’s known as the personal consumption expenditures price index, or the PCE. It’s the Federal Reserve’s favorite measure of inflation and it fell from 3.7% in the first quarter to 2.1% in the second quarter – dropping the annualized rate to 2.5%. When was the last time the PCE averaged 2.5%? Last December. What this means is that in the real-world cost of buying things – through the first six months of the second Trump presidency, the inflation rate was unchanged despite Trump’s imposition of tariffs. Now of course the questions are these... Will inflation rise as imports/inventories normalize in the third quarter that we’re now in? And...will Friday’s Liberation Day 2.0 tariffs for countries without trade deals in place prove to be a big deal? With these questions outstanding and with the inflation rate still above the Federal Reserve’s 2% target rate, it was no surprise to see that the Federal Reserve led by “Too Late” Jerome Powell left interest rates unchanged. And so, it was also no surprise to see that as a result...
Takeaway #2: Silence is golden?
After the GDP report was released at 8:30, President Trump had this to say: 2Q GDP JUST OUT: 3%, WAY BETTER THAN EXPECTED! “Too Late” MUST NOW LOWER THE RATE. No Inflation! Let people buy, and refinance, their homes! When the Fed opted not to lower interest rates the message was this... As an aside, but related to trade and inflation, President Trump also made it quite clear yesterday that August 1st is a hard deadline on trade. His first message was this: THE AUGUST FIRST DEADLINE IS THE AUGUST FIRST DEADLINE — IT STANDS STRONG, AND WILL NOT BE EXTENDED. A BIG DAY FOR AMERICA!!! His second message was this: AUGUST FIRST, A GREAT DAY FOR AMERICA!!! So yeah, get ready for Liberation Day 2.0 on Friday. The president also announced a new trade deal with South Korea, had tough words for Canada and India and Senator Josh Hawley, but was surprisingly quiet yesterday on the topic of interest rates. As expected, the Federal Reserve left interest rates unchanged yesterday – meaning it will now be September at the earliest that the Fed will revisit the issue. But what he didn’t address in any way was the Fed’s rate decision – which after his pressure campaign to lower interest rates – is a surprise. You know it’s only a matter of time before that changes, but the silence on the issue is interesting...
Takeaway #3: Protect The Rays
No, I’m not talking about keeping the Tampa Bay Rays in Tampa, though with the potential pool of new buyers in the bidding for the Rays, reportedly being local, that does appear to be likely to happen... I’m talking about keeping the most majestic of the rays in the water outside of Tampa Bay and everywhere around our state. I’m a water bug and have spent most of my free time around or in the water for the past 29 years. I’ve seen incredible things – I've experienced some incredible things – I could tell you stories all day. But to date the most incredible experience I’ve ever had was at low tide, only about twenty feet offshore. My wonderful wife Ashley and I were hanging out when we saw a massive disturbance. When we looked a bit closer, it became clear that five giant manta rays were making their way through the shallows together. It was an incredible experience and the only time we’ve seen manta rays in our waters. A recent video from Panama City Beach has gone viral as a group of men hooked and pulled in a giant Manta ray that turned out to be legal, due to a Marine Special Activity License to harvest the federally protected species to go to an aquarium in Asia. As it turns out, Florida is the only state to allow for the harvesting of Manta rays for any reason. While I grapple with the potential for greater appreciation of the ocean and its creatures that may come with in aquariums, what I’m not onboard with is effectively torturing this species to try to make it happen. If they’re born in captivity and can be raised in that environment, that’s one thing. Removing an adult female from Florida’s waters inhumanely with no indication if it will even survive the ordeal is another. It’s time to end the law allowing for this practice. It’s time to protect the rays.