Volatile trade, inventories boost US growth to 3.2pc in Q1

Shipping containers sit at the ports of Los Angeles and Long Beach, California in this aerial photo taken February 6, 2015. — Reuters pic
Shipping containers sit at the ports of Los Angeles and Long Beach, California in this aerial photo taken February 6, 2015. — Reuters pic

WASHINGTON, April 26 — US economic growth accelerated in the first quarter, but the burst in growth was driven by trade and the largest accumulation of unsold goods since 2015, temporary factors that are likely to reverse in the coming quarters.

Gross domestic product increased at a 3.2 per cent annualised rate in the first quarter, the Commerce Department said in its advance GDP report released today. Growth was also boosted by an increase in government investment, which offset sharp slowdowns in consumer and business spending.

Still, the mixed report could further dispel earlier fears of a recession that were stocked by a raft of weak economic data at the turn of the year. Those fears were also exacerbated by a brief inversion of the US Treasury yield curve.

The economy grew at a 2.2 per cent pace in the October-December period. Economists polled by Reuters had forecast GDP increasing at a 2.0 per cent rate in the first three months of the year. Growth has stepped down from a peak 4.2 per cent pace in the second quarter of 2018, when the White House’s US$1.5 trillion tax cut package jolted consumer spending.



The economy will mark 10 years of expansion in July, the longest on record.

Federal Reserve officials are likely to shrug off the surge in growth last quarter and focus on a measure of domestic demand, which increased at only a 1.3 per cent rate, the slowest since the second quarter of 2013, after increasing at a 2.6 per cent pace in the October-December quarter.

The Fed recently suspended its three-year monetary policy tightening campaign, dropping forecasts for any interest this year. The US increased borrowing costs four times in 2018.

Exports surged and imports declined in the first quarter, leading to a small deficit that added 1.03 percentage points to GDP after being neutral in the fourth quarter. Trade tensions between the United States and have caused wild swings in the trade deficit, with exporters and importers trying to stay ahead of the tariff fight between the two economic giants.

The standoff has also had an impact on inventories, which increased at a US$128.4 billion rate in the first quarter, the strongest pace since the second quarter of 2015. Inventories increased at a US$96.8 billion pace in the October-December quarter. Part of the inventory build was because of weak demand, especially in the automotive sector, which is expected to weigh on future production at factories.

Inventories contributed 0.65 percentage point to first-quarter GDP after adding one-tenth of a percentage point in the October-December period.

Growth in consumer spending, which accounts for more than two-thirds of US economic activity, slowed to a 1.2 per cent rate from the fourth quarter’s 2.5 per cent rate. The moderation in spending reflected a decline in motor vehicle purchases and other goods, likely related to a 35-day shutdown of the federal government. There was also a slowdown in spending on services.

Business spending on equipment braked sharply, rising at only at a 0.2 per cent rate, the slowest since the third quarter of 2016. Spending was held down by weak outlays on agricultural machinery and office furniture.



Residential construction fell at a 2.8 per cent rate, marking the fifth straight quarterly decline. Government investment rebounded at a 2.4 per cent rate, driven by spending at state and local governments. — Reuters

Source: The Malay Mail Online





Leave a Reply

Your email address will not be published. Required fields are marked as *

Time limit is exhausted. Please reload CAPTCHA.