Economic growth in the U.S. blew past expectations in the first quarter of 2019, easing fears of an impending slowdown that kicked off the year.
U.S. gross domestic product (GDP) grew at an annual rate of 3.2 percent in the first quarter of 2019, according to an initial estimate of growth released Friday by the Commerce Department.
Economists had expected U.S. GDP to grow roughly 2.5 percent between the first quarters of 2018 and 2019, typically one of the weaker periods for the American economy. Shaky financial markets, lagging retail sales and weak job gains all improved over the course of the first four months of 2019, improving the overall economic outlook along the way.
Increases in consumer spending, private inventory investment, nonresidential fixed investment, exports and nonfederal government spending helped drive strong first quarter growth, the Commerce Department said.
The second estimate for first-quarter growth, based on a fuller set of data, will be released on May 30.
The surprisingly high first quarter growth rate is the latest sign of strength for the U.S. economy well into its 10th year of expansion since the Great Recession. The economy grew at a solid 2.9 percent rate in 2018, but slowing growth and severe financial market turmoil to end the year raised concerns of an impending slowdown.
Despite a sluggish start to 2019, the U.S. economy has added an average 180,000 jobs per month this year while the stock market has reached record highs.
The persistent strength of the economy is also welcome news for President Trump, who is banking on consistent growth and low unemployment to survive a difficult reelection bid in 2020.
Trump told reporters Friday morning that while he couldn't comment directly on the GDP numbers, “The country through is doing very well in every respect.”
White House officials are barred from commenting on closely watched economic data within the first hour after its release.
“We’re knocking it out of the park, as they say. And we’re very happy about that," Trump said shortly after the report was published.
Strong first quarter growth may force public and private sector economists to revise their projections for 2019. The Federal Reserve and Congressional Budget Office (CBO) have predicted 2.1 percent GDP growth for 2019, while the White House expects 3.0 percent.
The U.S. economy still faces several threats between now and the election. The mounting costs of Trump's trade battles, fading fiscal stimulus from the 2017 tax cuts and spending increases, and the uncertain future of the North American Free Trade Agreement all pose risks to economic growth.
Several economists said Monday that while the top line GDP number looked strong, some of the underlying data highlighted potential weaknesses in the economy.
Personal consumption spending rose just 1.2 percent in the first quarter, compared to increases of 2.5 percent in the fourth quarter of 2018, 3.5 percent in the third quarter and 3.8 percent in the second quarter.
Private nonresidential investment slowed to a 2.7 percent increase in the first quarter despite Republican efforts to boost business expansion through the 2017 tax cuts.
Jason Furman, who chaired the Council of Economic Advisers (CEA) under former President Obama, said noted a meager 1.3 percent increase in final sales to private domestic purchasers, a narrower metric for private-sector economic health.
Furman argued that final sales to private domestic purchasers is a better predictor of future growth since it excludes volatile sectors such as government spending, inventory building and government exports.
"GDP is volatile so this is weak signal," Furman tweeted. "But to the degree today’s data has any info it is that the underlying trend of consumption and investment is weakening.
David Berson, chief economist at Nationwide, argued that large increases in inventory building and government spending were "unsustainable. He also said that it's unclear if the jump in exports reflects a trend improvement or short-term impacts of trade wars.
"While growth is unlikely to continue at this pace, real GDP growth for all of 2019 is likely to be a still solid 2.5 percent -- above the trend rate of growth of around 2.0 percent," Berson added.
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