U.S. Economic Growth Slows Less Than Expected In Q1April 30, 2018
Economic growth in the U.S. continued to slow in the first quarter of 2018, according to a report released by the Commerce Department on Friday, although the pace of growth during the quarter still exceeded economist estimates.
The Commerce Department said real gross domestic product climbed by 2.3 percent in the first quarter compared to the 2.9 percent jump in the fourth quarter. Economists had expected GDP to increase by about 2.0 percent.
The stronger than expected GDP growth reflected positive contributions from non-residential fixed investment, consumer spending, exports, private inventory investment, and government spending.
On the other hand, the report showed a 2.6 percent increase in imports, which are a subtraction in the calculation of GDP.
Consumer spending rose by 1.1 percent in the first quarter, although that reflects a substantial slowdown from the 4.0 percent spike seen in the fourth quarter.
The slowdown in the pace of GDP growth also reflected decelerations in residential fixed investment, exports, and state and local government spending.
The decelerations were partly offset by an upturn in private inventory investment and a slowdown in the pace of import growth.
James Knightley, Chief International Economist at ING, noted the first quarter is typically the worst quarter for GDP growth, despite seasonal adjustment.
“Over the past 30 years growth in the second quarter of any given year has on average been 1.4% faster than in the first. So here’s to 3.7% growth in 2Q!” Knightley said. “In all fairness it is close to what we are currently forecasting.”
“After all, retail sales rebounded in March, suggesting the domestic economy has regained some momentum while confidence is strong and the jobs market is robust, which is contributing to higher wages,” he added. “Tax cuts will also be supporting spending.”
On the inflation front, a reading on core consumer prices, which exclude food and energy prices, showed that the pace of price growth surged up to 2.5 percent in the first quarter from 1.9 percent in the fourth quarter.
“With clear signs that inflation is rising pretty rapidly now, the Fed will need to tighten more aggressively this year and that will lay the seeds for an economic slowdown starting next year,” said Paul Ashworth, Chief U.S. Economist at Capital Economics.