US economic growth slowed to 2.3 percent pace in Q1

Published 6:46 am Tuesday, May 1, 2018

WASHINGTON — The U.S. economy slowed to a moderate 2.3 percent annual growth rate in the first quarter as consumer spending turned in the weakest performance in nearly five years. Still, the January-March increase came in better than expected, supporting hopes for a solid rebound for the rest of the year.

The Commerce Department reported Friday that the gain in the gross domestic product, the economy’s total output of goods and services, followed a 2.9 percent rise in the fourth quarter and gains above 3 percent in the previous two quarters.

Many economists had forecast that growth would slip below 2 percent in the first quarter, reflecting a big pullback by consumers after a torrid pace of spending in the fourth quarter. Recent history has shown a pattern of weakness in the first quarter, reflecting in part seasonal data quirks. Analysts expect growth to surpass 3 percent in the current quarter.

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Consumer spending, which accounts for 70 percent of economic activity, decelerated sharply from a 4 percent growth rate in the fourth quarter to a 1.1 percent pace in the first quarter. That was offset somewhat by gains in inventory building by businesses and a lower trade deficit.

Analysts viewed the first quarter slowdown as temporary, with consumers expected to boost their spending amid a low unemployment rate and the initial impact of the $1.5 trillion in tax cuts that Congress approved in December.

Over the past four quarters, GDP growth has averaged 2.9 percent, just below the 3 percent projection the Trump administration used in its budget for next year.

A separate report Friday found that U.S. private sector workers saw their wages go up 1 percent in the first quarter, the biggest quarterly gain in 11 years, a sign that the tight job market is beginning to lift wages.

Republicans who supported the administration’s successful push to win passage of major tax cuts in December said the reports on wages and GDP growth were indications that the tax cuts and other parts of the Trump economic program were beginning to have an impact.

Rep. Erik Paulson, R-Minnesota and chairman of the Joint Economic Committee, said that Americans are better off today than 16 months ago “thanks to tax reform and pro-growth policies.”