US First Quarter Economic Growth Slows Less Than Forecast

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First-quarter growth has been much lower than other quarters in recent years, leading economists to speculate there are problems with how government statisticians factor in seasonal adjustments.

The U.S. economy slowed in the first quarter as consumer spending grew at its weakest pace in almost five years, but the setback is likely temporary against the backdrop of a tightening labor market and large fiscal stimulus.

The price index for gross domestic purchases increased 2.8 percent in the first quarter, compared with an increase of 2.5 percent in the fourth.

The first-quarter figures showed household consumption added 0.73 percentage point to GDP growth, after 2.75 points in the prior quarter that represented a 4% annualized gain.

The pace of America's economic growth slowed in the first quarter, though it remains stronger than economists had predicted.

This first read on economic growth is, for better or for worse, being seen by some as a test of the efficacy of the Republican tax cuts. First-quarter GDP is usually impacted by seasonality. "Tax cuts will support consumer spending and business investment", while "trade is certainly a risk".

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Earnings per share of $0.95 were up 36 per cent from the year-ago quarter and ahead of the $0.85 estimate given by analysts. The total amount of Office 365 commercial monthly active users (not paid subscribers, for some reason) is over 135 million.

Many economists had forecast that growth would slip below 2 percent in the first quarter, reflecting a big pullback by consumers after a torrid pace of spending in the fourth quarter.

The report suggested the initial impetus from the $1.5 trillion tax cut passed by Congress late last year was modest at best for households, though many economists expect the full impact won't likely be felt for years.

The Trump administration has promised 3 percent GDP growth or better, due in large part to the tax cuts that were passed late a year ago.

Growth in consumer spending, which makes up more than two-thirds of United States economic activity, eased to a 1.1% rate in the first three months of 2018. "After all, 2.3% is still above most estimates of the economy's potential growth rate", he said. Former Obama economic adviser Jason Furman noted that the first quarter number was boosted by a "volatile inventory buildup" that will not likely be repeated. Business-equipment spending and residential investment also cooled, with the government citing a downturn in brokers' commissions on home sales. The core PCE price index rose at a 1.9 percent pace in the fourth quarter.

Trade added 0.20 percentage point to GDP growth as rising exports offset an increase in imports that was driven by royalties and broadcast license fees related to the Winter Olympics. In my testimony before the Joint Economic Committee earlier this month, I said that tax reform should lead to $55 billion in additional fixed investment in manufacturing this year, with the sector adding at least 100,000 more workers. Investment in nonresidential structures, including office buildings and factories, rose 12.3 percent, the most in a year. The cooling in equipment investment comes as the stimulus from a recovery in commodity prices is fading. "So here's to 3.7% growth in 2Q!"

At the same time, Boeing said it's seeing solid global demand, while United Parcel Service said the USA economy is showing "healthy fundamentals".

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