Consumer Finance

GDP Growth Slowed Less Than Expected But Concerns Abound

The economy in the U.S. slowed at a rate that was less than initially expected during the first three months of the year, but business investment softened and consumer spending moderated, raising concerns about the economy’s growth prospects for the current quarter.

According to a report by Reuters late last week, the gross domestic product (GDP) during the first quarter increased at a rate of 1.2 percent instead of the 0.7 percent reported in the fourth quarter. It marks the worse performance in a year, noted the report. In the fourth quarter, growth came in at 2.1 percent.

"Economic indicators so far aren't entirely convincing on a second-quarter bounce in activity and show a U.S. economy struggling to surprise on the upside," Scott Anderson, chief economist at Bank of the West, told Reuters in an interview. Reuters noted the GDP in the first quarter tends to miss expectations largely because of the difficulty in calculating the data. Inventory investment, which was far smaller than previous, hurt GDP growth, noted the report.

Weakness in first-quarter GDP doesn’t bode well for President Donald Trump’s plan to increase GDP growth to 3 percent. During the run-up to the election, Trump had touted 4 percent GDP growth, noted the report. Given the weak productivity shown in the quarter, analysts told Reuters they aren’t sure Trump’s stimulus ideas will actually result in fast economic growth.

"If the economy is going to grow at 3 percent for as long as the eye can see, businesses better spend lots of money on capital goods. That is not happening," said Joel Naroff, chief economist at Naroff Economic Advisors, in the Reuters report. The little growth isn’t deterring the Federal Reserve’s move to raise interest rates in June, noted the report.

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