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26 May 2017
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| U.S. economy (The Total Investment & Insurance Solutions) |
The U.S. economy started 2017 out with a whimper, but it wasn't quite as
weak as first thought. The government revised up its January-March growth
reading to a rate of 1.2 percent — better than an earlier estimate of 0.7
percent but well below President Donald Trump's ambitious growth targets.
Growth in the gross domestic product, the
broadest measure of economic health, is down from a 2.1 percent annual growth
rate in the fourth quarter and marks the weakest result in a year, the Commerce
Department reported Friday. The Total
Investment & Insurance Solutions
The upgrade to 1.2 percent reflected
new-found strength in consumer spending, business investment and state and
local government spending. The Total
Investment & Insurance Solutions
Many economists believe growth in the current April-June quarter will
rebound sharply to above 3 percent, helped by stronger consumer spending that
reflects solid employment gains and an unemployment rate that has fallen to a
decade low of 4.4 percent. Moreover, part of the first quarter weakness
reflected various temporary factors such as unusually warm winter weather.
Paul Ashworth, chief U.S. economist at
Capital Economics, said even with the upward revision it "doesn't alter
the fact that it was another disappointing start to the year."
But he and other analysts said they were
still looking for a better showing in the current quarter.
"Growth is bouncing back in the second
quarter," said Gus Faucher, chief economist at PNC. "Consumer
spending continues to expand with job and wage gains, and business investment
is picking up, especially for energy-related industries." The Total Investment & Insurance
Solutions
However, after a spring surge, analysts
believe growth will fall back to a level of 2 percent to 2.5 percent in the
second half of the year — the same modest pace that has been in effect for the
almost eight years of this economic recovery, making it the slowest expansion in
the post-World War II period.
During the campaign, Trump attacked the
economy's weak growth and blamed it on failed economic policies of the Obama
administration. He vowed that his economic program of tax cuts, deregulation
and tougher enforcement of trade agreements would double growth to 4 percent or
better.
Trump released his first budget on Tuesday, a
$4.1 trillion spending plan that counts on faster growth to trim deficits by $2
trillion over the next decade. Many private economists believe Trump's budget
is far too optimistic about how fast the U.S. economy can grow, given an aging
workforce and stubbornly low productivity gains. The Total Investment & Insurance Solutions
The economy grew 1.6 percent for all of last
year, the poorest showing in five years. With Trump's legislative program running
into obstacles in Congress, forecasters have been trimming their growth numbers
for the second half of this year and pushing any gains from Trump's tax cuts
into 2018.
The revision for the first quarter reflected
a boost in consumer spending to an annual rate of 0.6 percent, still the
slowest in seven years but up from an initial estimate of 0.3 percent. Analysts
believe that consumer spending should expand in the current quarter, helped in
part by the tendency of consumers to spend more during periods of rising stock
prices and home values because their net worth is increasing.
The latest result was also driven by lower
declines in spending by state and local governments than initially thought and
stronger investment by businesses in structures and intellectual property.
The report on GDP represented the
government's second of three estimates of GDP performance in the first quarter.The Total Investment & Insurance
Solutions
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