First Quarter GDP Grew 2.3%

Real gross domestic product (GDP) increased at an annual rate of 2.3 percent in the first quarter of 2018, according to the "advance" estimate released by the Bureau of Economic Analysis.

GDP, the value of all goods and services produced within the U.S., increased at an annualized rate of 2.3%, down from 2.9% in the fourth quarter. Goods spending declined 1.1 percent at the annual rate in the first quarter, pulling back from the 7.8 percent gain in the fourth quarter (the strongest quarterly gain in almost 12 years).

Looking at the data as a whole, Bloomberg's Sho Chandra concluded that "the results underline the difficulty of achieving President Donald Trump's goal of 3 percent sustained growth, despite corporate and individual tax cuts that went into effect in January".

Weakness in the GDP report also was evident in government outlays and consumer spending, which slowed to a 1.1 percent gain from 4 percent in the final quarter of 2017.

Wall Street Journal Global Economics Editor Jon Hilsenrath on first-quarter GDP.

Since the expansion began almost nine years ago, first-quarter economic growth has averaged just a 1.2 percent annual rate, less than half as fast as the other quarters, according to O'Sullivan of High-Frequency Economics. Goods exports increased 6.1 percent in the first quarter, which was more than enough to offset the 2.1 percent rise in goods imports.

Commerce Department analysts reported worrying signs of rising prices with a key price index, excluding volatile food and energy costs, rising 2.5 percent.

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The Commerce Department report showed a robust contribution from business investment, which rose more than 6 percent. Construction-equipment maker Caterpillar, a bellwether for growth, said this week that its first-quarter adjusted profit per share "will be the high water mark for the year", sending its shares down the most since mid-2016.

The report said the consumer sentiment index for April was upwardly revised to 98.8 from the preliminary reading of 97.8. The trade deficit decreased due to the 4.8% increase of exports outpacing the slower increase of imports of 2.6%, thus adding to GDP.

Paul Ashworth, chief USA economist at Capital Economics, said the latest GDP figures were "something of a disappointment since the tax cuts should have provided an immediate boost". Moving forward, real GDP should grow by roughly 3 percent in 2018, which would be the strongest growth rate since 2005. Inventory investment is expected to have contributed to GDP growth after subtracting 0.53 percentage point in the fourth quarter. This growth is somewhat slower than in the prior three quarters, however, a better performance than was expected.

Despite the slower growth, the United States economy remains in strong shape. Investment in nonresidential structures, including office buildings and factories, rose 12.3 percent, the most in a year. The U.S. central bank raised interest rates last month in a nod to the strong labor market and economy, and forecast at least two more rate hikes this year. Now it figures growth will be 3.3% - a significant upward revision.

Muted household spending was the catalyst for the drop-off.

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

(Copyright © 2015. All Rights Reserved.)
 
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