REUTERS/Brian Snyder
- The Commerce Department said Friday that the economy grew at a far faster pace than expected at the beginning of the year.
- Gross domestic product, a measure of all the goods and services produced in a country, expanded at an annualized rate of 3.2% in the first quarter. Economists had expected 2.3% growth.
- The economy grew at a pace just under the Trump administration’s goal of 3% last year, boosted by the $1.5 trillion tax cuts passed in 2017 and increased public spending.
The American economy grew far faster than expected at the beginning of 2019.
The Commerce Department said Friday that gross domestic product, a measure of all the goods and services produced in a country, expanded at an annualized rate of 3.2% in the first quarter. Economists surveyed by Bloomberg had forecast 2.3% growth.
The acceleration was largely thanks to a sharp jump in American exports, which rose 3.7%. That was potentially a reflection of companies frontloading products because of ongoing trade tensions, however, and isn’t expected to last.
“That won’t continue against a backdrop of very weak global trade,” said Paul Ashworth, the chief economist at Capital Economics.
Consumer spending, which accounts for more than two-thirds of economic activity, came in below expectations at 1.2% in the first quarter. Business spending on capital slowed, with nonresidential fixed investment growing 2.7%.
Spending got off to a rough start to the year following the five-week federal government shutdown that ended in late January, which was the longest in history. But it appeared to stage a recovery in March, with confidence also ticking higher.
Measures of inflation came in far below the 2% target set by the Federal Reserve, which has signaled plans to keep interest rates steady this year. Personal consumption expenditures rose 0.6% between January and March, compared with a 1.5% increase in the fourth quarter.
“Pressure on policymakers will come from the labor market, with unemployment likely to hit new lows while wage growth hits new highs, rather than the contemporaneous inflation data,” said Ian Shepherdson, the chief economist at Pantheon Macroeconomics.
The economy grew at a pace just under the Trump administration’s goal of 3% last year, propelled by the $1.5 trillion tax cuts passed in 2017 and increased public spending.
But as the effects of stimulus measures fade and global growth cools, activity is widely expected to slow in the coming months. The Fed dimmed its outlook for the economy in March, predicting the US economy will expand at a pace of 2.1% this year.
Friday’s reading is preliminary; a second estimate for the first quarter is scheduled to be released May 30.
