U.S. gross domestic product (GDP) growth strengthened in the first quarter of 2019, according to new data from the Bureau of Economic Analysis. Specifically, real GDP, which measures the value of the production of goods and services in America adjusted for price changes (inflation), increased at an annual rate of 3.2 percent in Q1. That is up from Q4 2018’s 2.2 percent pace of expansion, the largest expectations beat since 2014, and the 8th consecutive quarter of GDP growth above 2 percent. It is worth mentioning that this is only the first estimate of Q1 growth, meaning that large revisions are possible over the next few months.
Under the hood, consumer spending, which accounts for the bulk of the economy, rose by 1.2 percent in Q1, slightly better than anticipated. Inventories and trade also provided a boost to GDP in Q1, but these are typically volatile components that could wind up being a drag on growth in subsequent quarters. However, a separate report from the Census Bureau showed that core capital expenditures, an important proxy for U.S. business investment, improved recently, which bodes well for broader growth in Q2. Overall, this was another very solid GDP report, especially given the partial government shutdown, recent seasonality, and other headwinds the economy had to overcome in the first quarter. Going forward the aging expansion will continue to face obstacles but as long as wage growth is being driven by the bottom quintile of earners and other supportive fundamentals remain in place, save some major exogenous shock, it is hard to see the economy tumbling into a recession.
Sources: Econoday, U.S. DoC, Twitter, Bloomberg, FRBSL
Post author: Charles Couch