Did U.S. economy turn in another first-quarter dud?
Spring is here, and that means it’s time for another potentially disappointing report on first-quarter economic growth. The economy has routinely underperformed early in the year, though many economists attribute the poor showings to government measurement problems.
A busy week of economic news also brings fresh readings on consumer confidence, new and existing home sales and business investment.
Existing home sales have been choppy, largely because of supply shortages. Cold weather in March likely curtailed purchases, Nomura economist Lewis Alexander says. Also, climbing house prices and mortgage rates are partly offsetting healthy demand fueled by solid job and income growth. After existing home sales rose 3% in February, economists expect the National Association of Realtors on Monday to report a modest 0.2% bump in March to a seasonally adjusted annual rate of 5.55 million.
New home sales face similar hurdles. Home building is picking up but has been limited by shortages of construction workers and available lots, as well as stringent regulations in many cities. Unseasonably cold temperatures last month also played a role. After new home sales fell for three months, the Commerce Department is projected Tuesday to record a 1.4% rise for March to an annual rate of 627,000.
Consumer confidence has hovered close to the 18-year high reached in February on the healthy labor market, stillhigh stock prices and recent tax cuts, Alexander says. But growing trade standoffs between the U.S. and China likely damped Americans’ outlook somewhat, he says. Economists expect the Conference Board to report a modest dip in its consumer confidence index for April to a level that remains elevated.
On Thursday, Commerce releases a report on business purchases of computers, appliances, factory equipment and other long-lasting goods. Economists estimate core capital goods orders excluding aircraft and defense rose a sturdy 0.6% last month.
After growing at a better than 3% annual rate the last nine months of 2017, the economy appears due for a characteristic first-quarter slowdown. Consumer spending, which makes up 70% of economic activity, was weak early in the year, Barclays Chief Economist Michael Gapen says. Business spending and stockpiling, he says, probably posted solid growth but residential investment sagged. All told, economists expect Commerce on Friday to estimate the economy grew at a 2.1% annual rate the first three months of the year. Gapen, however, thinks the measurement problems will help trim that to 1.5%.