U.S. econ­omy grew at 3.2 per cent in first quar­ter

The Prince George Citizen - - Money - Martin CRUTSINGER

WASH­ING­TON — The U.S. econ­omy grew at a solid 3.2 per cent annual rate in the first three months of the year, a far bet­ter out­come than ex­pected, over­com­ing a host of head­winds in­clud­ing global weak­ness, ris­ing trade ten­sions and a par­tial govern­ment shut­down.

The ad­vance in the gross do­mes­tic prod­uct, the broad­est mea­sure of eco­nomic health, marks an ac­cel­er­a­tion from a 2.2 per cent gain in the pre­vi­ous Oc­to­ber-De­cem­ber pe­riod, the Com­merce De­part­ment re­ported Fri­day. How­ever, about half the gain re­flected two fac­tors not ex­pected to last – a big jump in stock­pil­ing by busi­nesses and a sharp con­trac­tion in the trade deficit.

Still, the GDP gain sur­passed the three per cent bar set by U.S. Pres­i­dent Don­ald Trump as ev­i­dence his eco­nomic pro­gram is work­ing. Trump is counting on a strong econ­omy as he cam­paigns for re-elec­tion.

In a tweet, Trump called the 3.2 per cent growth “far above ex­pec­ta­tions.”

Speak­ing to re­porters be­fore leav­ing Wash­ing­ton for a speech to the Na­tional Ri­fle As­so­ci­a­tion, Trump termed the GDP fig­ure an “in­cred­i­ble num­ber” and said,

“Our econ­omy is do­ing great. Num­ber One in the world.”

It was the strong­est first quar­ter growth rate since 2015. In re­cent years, GDP has been ex­cep­tion­ally weak in the first quar­ter. There had been fears growth could dip below one per cent this year due to a va­ri­ety of ad­verse fac­tors such as the De­cem­ber stock mar­ket nose­dive, ris­ing weak­ness in key economies over­seas, the U.S. trade war with China and a 35-day par­tial govern­ment shut­down that ended in Jan­uary.

But the econ­omy shrugged off those con­cerns, helped by an an­nounce­ment in early Jan­uary from the Fed­eral Reserve that af­ter rais­ing rates four times last year, it was declar­ing a pause on fur­ther rate hikes. That spurred a stock mar­ket re­bound by eas­ing con­cerns that the cen­tral bank might overdo its credit tight­en­ing and send the coun­try into a re­ces­sion.

In the first quar­ter, in­ven­tory re­build­ing added 0.7 per­cent­age point to growth, while a fall­ing trade deficit boosted growth by a full per­cent­age point. An­a­lysts think both of those fac­tors will re­verse in the cur­rent quar­ter. An­a­lysts at Macroe­co­nomic Ad­vis­ers said they expect the U.S. GDP will slow to a 1.8 per cent rate in the sec­ond quar­ter.

“The driv­ers of growth in the first quar­ter are un­likely to per­sist,” said Gus Faucher, chief econ­o­mist at PNC.

Con­sumer spend­ing, which accounts for 70 per cent of eco­nomic ac­tiv­ity, slowed to growth at a rate of just 1.2 per cent in the first quar­ter.Spend­ing on durable goods fell at a rate of 5.3 per cent, the big­gest de­cline in a decade.

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