Tax cuts aren’t motivating shoppers

The US economy’s growth slowed down in the first quarter as consumers reined in spending even after the big tax cuts got signed by President Trump.

The economy grew at a moderate 2.3 percent rate during the first three months of the year, down from 2.9 percent in the fourth quarter, according to the Commerce Department.

While the tax cuts only came into effect for most Americans midway through the quarter, the pace of growth averaged 3 percent during the last three quarters of the year, suggesting that the benefit wasn’t as great as expected.

“Greater spending and tax cuts from Washington are normally done in recessions, not when the economy has grown for several years and is already at full employment,” Chris Rupkey, chief financial economist at MUFG, said in a note. “Americans are working and have chickens in every pot already.”

Business spending also slowed. The rate that firms were investing in equipment—a measure of corporate America’s confidence in the economy—fell to 4.7 percent, down from 11.6 percent the quarter before, according to the data.

“Despite the biggest corporate tax cut in history, many businesses may have bought all the equipment they need already earlier in this long, nine-year, economic expansion,” Rupkey said.

It’s still unclear whether this is a blip or the start of a sustained slowdown. While the first quarter was slower than the fourth, that may have more to do with the gangbusters holiday season and bad weather at the start of this year.