US cuts Q1 economic growth to 2%

> Consumer spending in first quarter weakest in five years

WASHINGTON: The US economy slowed more than previously estimated in the first quarter amid the weakest performance in consumer spending in nearly five years, but growth appears to have since regained momentum on the back of a robust labour market and tax cuts.

Gross domestic product increased at a 2% annual rate in the January-March period, the Commerce Department said yesterday in its third estimate of first-quarter GDP, instead of the 2.2% pace it reported last month.

The economy grew at a 2.9% rate in the fourth quarter. The downgrade to first-quarter growth reflected weaker consumer spending and a smaller inventory accumulation than the government had estimated last month.

A US$1.5 trillion (RM6.1 trillion) income tax cut package, which came into effect in January, is seen spurring faster economic growth in the second quarter, putting annual GDP growth on track to achieve the Trump administration’s 3% target.

Economists, however, caution that the administration’s “America First” policies, which have heightened fears of trade wars, are casting a pall over the economy’s prospects.

The United States is engaged in tit-for-tat trade tariffs with its major trade partners, including China, Canada, Mexico and the European Union, which analysts fear could disrupt supply chains and undercut business investment and potentially wipe out the fiscal stimulus.

Growth estimates for the second quarter are as high as a 5.3% rate. Economists had expected first-quarter GDP growth would be unrevised at a 2.2% pace.

An alternative measure of economic growth, gross domestic income (GDI), increased at a brisk 3.6% rate in the JanuaryMarch quarter. That was revised up from the 2.8% pace reported last month. – Reuters