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US growth slows to 2.3% as consumer spending eases



U.S. Economic growth slowed in the last quarter as consumers eased after exaggerations in the previous period, although solid business investment eased some of the weakness.

Gross domestic product, the value of all goods and services produced in the nation, increased at an annualized rate of 2.3 percent, after rising 2.9 percent in the previous quarter, the Commerce Department reported Friday. The median forecast of Bloomberg's surveyed economists called for a 2 percent gain. Private consumption, the largest part of the economy, rose 1.1 percent, the lowest since 2013.

While GDP growth has been the best since January / March since 2015, it is a decline of three Quarter GDP growth is close to or near 3 percent, reminding that the first quarter continues to be driven by data distress. Analysts expect recovery as tax cuts occur in a strong labor market, although tailwinds such as low inflation and borrowing costs are starting to dwindle and trade tensions are counterproductive.

"The first quarter has been persistently weak in recent years, said David Sloan, senior economist at Continuum Economics, before the report." We expect a recovery. Tax cuts will support consumer spending and business investment "while" trading poses some risk.

A separate report from the Labor Department on Friday showed that broad employee compensation in the first quarter has risen faster than expected, the tense labor market supports wage growth.

GDP growth of 2.3 percent is still faster than what the Federal Reserve sees as a long-term potential for the economy and officials have previously said they see the first quarter The economy is ready to reach a milestone in May – the second-longest expansion since records began. that the central bank raises interest rates in June for the second time this year.

Trump's Goal

Nonetheless, the findings underscore the difficulty of achieving President Donald Trump's goal of 3 percent sustained growth despite corporate and individual tax cuts introduced in January Other figures from Friday cast a shadow on the st The European economy lost momentum in the first quarter as expansion from Britain to France slowed, partly because winter storms pervaded the region.

The slowdown in consumer spending, the US GDP report for the first quarter, showed a slowdown in spending on office equipment and housing investment, with the government reporting a decline in brokerage commissions on home sales. Spending on non-industrial structures and intellectual property accelerated during the period and limited further slowdown.

Government spending slowed from 3 percent to 1.2 percent as spending at federal, state and local levels slowed. Trading contributed 0.2 percentage points to growth, while inventories added 0.43 points, a reversal from the previous quarter when they pulled back 1.69 points. Trade and inventories are two of the most volatile components in GDP calculations.

The report also showed that price pressure is on the rise. The GDP price index rose 2 percent in the first quarter. A measure of inflation, which is linked to consumer spending and excludes volatile food and energy costs, rose at an annualized 2.5 percent pace, the fastest since 2011, and heightens the signs that price gains are picking up.

After adjusting for inflation, the final sales of domestic buyers – which reduce inventories and trade – rose 1.6 percent, the lowest in two years, after a 4.5 percent increase, the fastest since 2010 ,

Analysts' forecasts for economic growth ranged from 0.5 percent to 2.8 percent. The GDP estimate is the first of three for the quarter, with other releases scheduled for May and June as more information becomes available.

Quarter's Quirks

Economists say that statistical quirks or so-called residual seasonality are behind some of the disappointing GDP results of the first quarter in recent years. In five of the past eight years, the first quarter was the worst of the year. The Bureau of Economic Analysis of the Ministry of Commerce is revising its methodology to tackle the problem.

Looking beyond the quarterly fluctuations, underlying demand looks resilient, analysts said before the report. Retail sales increased more than expected in March and car purchases improved. The data released on Thursday showed a better picture of the trade deficit towards the end of the first quarter, but a weaker surrender for investment.

Meanwhile, changes in US trade and customs policies pose a risk to the outlook. According to Bloomberg's median forecast, the economy could expand 2.8 percent in 2018 before slowing down over the next two years.

First quarter figures show that private consumption contributed 0.73 percentage points to GDP growth the previous quarter, which represents an annualized gain of 4 percent.

Investments in property, plant and equipment, structures and intellectual property increased at a still solid annual growth rate of 6.1 percent, contributing 0.76 percentage points to growth. It grew by 6.8 percent in the previous quarter.

Among the details, equipment expenditures increased 4.7 percent, after a three-year high of 11.6 percent. Investment in commercial properties, including office buildings and factories, increased 12.3 percent, most in a year. Residential investment remained flat versus the previous quarter after rising 12.8 percent.

Consumer spending

The slowdown in US consumer spending, according to the report, reflected slower car sales as well as apparel, footwear, food and beverage purchases. This was despite an annual increase in disposable income of 3.4 percent, the biggest jump since 2015, thanks to tax cuts under the new law.

With Amazon.com and Walmart battling for customer dollars, lower spending could underscore the challenges businesses face selling food and household products. Large consumer goods companies, including Nestle, Unilever and Reckitt Benckiser Group, are struggling to raise prices for their products due to intense retail competition.

In addition, investors have focused on some comments from companies that point to an economy 2018 weaker than expected. Construction equipment maker Caterpillar, a growth captain, said this week that adjusted earnings per share in the first quarter will be "the high water mark for the year" and that stocks have fallen the most since mid-2016.

At the same time, Boeing said there was solid global demand, while United Parcel Service said the US economy was showing "healthy fundamentals."

– With the support of Craig Giammona, Chris Middleton and Sophie Caronello


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