Economic growth stalls in the early months of 2017

Posted April 30, 2017

The sluggish Q1 GDP growth fell short of analyst predictions of 1.2 percent growth and was the slowest growth rate since first quarter 2014, according to a report from Reuters news service. The report showed GDP had increased just 0.7 percent during the time frame, which was both below expectations and the "weakest growth in three years".

Consumption, usually the largest contributor to GDP growth, accounted for only 0.2% of the gain, down from 2.4% during the fourth quarter.

The U.S. gross domestic product grew at a measly 0.7 percent in the first quarter. What's more, after encouraging job reports were released showing strong growth in January and February, Team Trump insisted that this president, not Barack Obama, deserves the credit.

And U.S. exports increased 5.8 percent in the first quarter, reversing a 4.5 percent decline the previous quarter. In the last quarter of 2016, consumption rose by 3.5 percent. Of course, these estimates might drift higher with passage of more pro-growth policies, especially in terms of the outlook later this year and into 2018. After an 11.4 percent increase in the fourth quarter, those purchases declined 2.5 percent in the first three months of this year.

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Business investment improved further, with spending on equipment jumping at a 9.1 per cent. Spending on mining exploration, wells and shafts surged at a record 449 per cent. Because almost a third of this quarter occurred under the final days of the Obama administration, Trump will likely turn the focus of this dismal report to his predecessor.

"Consumption growth will rebound in the second quarter", says Paul Ashworth, chief United States economist at Capital Economics, a research firm. That suggests the mostly weather-induced sharp slowdown in consumer spending is probably temporary.

In unveiling an outline of the administration's tax proposals on Wednesday, Treasury Secretary Steven Mnuchin said he believed growth above 3 percent would be achievable.

Economists are more skeptical.

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Retail spending was weaker in the first quarter 2017.

The Federal Reserve projects USA growth will be about 2% for the next few years.

United Kingdom manufacturing, meanwhile, rose by 0.5 percentpc in the first quarter due to the an increase in motor vehicle production, the ONS said. But this does come with the appropriate caution that "weaker growth is partly due to persistent measurement issues, which have caused the government to underestimate growth in the first quarter for many years - and reflected poorly on other presidents in their first quarter in office". "A warm one, as was the case this year, can produce lower utility bills", said Brian Schaitkin, senior economist at the Conference Board. The overall GDP deflator rose at a 2.2 percent annual rate, with the core PCE rising at a 2.0 percent annual rate in the quarter.

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