First Quarter GDP Weak

First Quarter GDP Weak

The median forecast of economists surveyed by Bloomberg called for a 1% increase.

Consumer spending grew just 0.3 percent in the first quarter, down from 3.5 percent the previous quarter.

"The weakness is not a reflection of the underlying health of the economy, part of it is residual seasonality", said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania.

In unveiling a tax overhaul plan this week that would slash business rates, Treasury Secretary Steven T. Mnuchin said the administration hoped it would lead to sustained growth of 3 percent a year. It was the worst since the first quarter of 2014, when unusually bad weather in much of the country and a West Coast port dispute caused the economy to contract at a 1.2 percent annual rate.

Traders pinpointed the problem with the GDP as slow consumer spending.

Britain's powerhouse services sector, which accounts for 78% of the United Kingdom economy, put downward pressure on overall growth after expanding by 0.3% between January and March this year, slowing from 0.8% between October and December of 2016. The employment cost index, which measures how much employers spend on wages and benefits, surged a better-than-expected 0.8 percent in the first quarter.

The results mark a damp start to the presidency of Donald Trump, who reaches 100 days in office Saturday and was elected on a message of a protectionist economic revival. Analysts' estimates indicate just 2.2 percent to 2.3 percent annual growth through 2019, a tad above the average pace during the nearly eight-year expansion.

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A separate report from the Labor Department Friday showed that its employment cost index-roughly, a proxy for wages-had its best performance in almost a decade, rising by 0.8 percent. They are forecasting growth of this year around 2.2 percent.

"US GDP figures are typically weaker in the first quarter, so this reading is in line with the seasonal trend", said Nancy Curtin, chief investment officer at Close Brothers Asset Management.

On the optimistic side, traders said that steady growth was still intact.

After contributing to GDP growth for two straight quarters, inventory investment was likely a drag in the first quarter.

Here's how seasonality works: we know that consumers tend to spend more around Christmas.

Investments in home building rose by 13.7 percent from January to March, marking the construction sector as a major driver for the United States economy. Even though hiring has been humming along and the jobless rate of 4.5 percent is the lowest in nearly a decade, a sustained pickup in wage growth would help boost consumers' ability to spend. Business spending in the residential segment added another 0.5pc to the economic growth. Companies accumulated stock at a rate of $10.3 billion, down from $49.6 billion in the previous quarter. In the fourth quarter the core PCE rose at just a 1.3 percent rate, so the year-over-year change is still just 1.7 percent. Consumption spending increased to an annual rate of $11.7 trillion, up $9.7 billion from the preceding quarter.

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