Since it's been a while, today is a good time to have an update on the US gross domestic product (GDP) with details provided by Trading Economics.
For the first quarter of 2018, the US economy grew at an annualized rate of 2.3 percent, which is lower than the 2.9 percent from the previous period, yet exceeded analyst forecasts of 2.0 percent. While that seems good on the surface, it is still the lowest growth rate in a year, the advance estimate showed, that the decline was namely due to the face that personal consumption slowed amid lower spending on cars, clothing and footwear and residential investment stalled.
Personal consumption expenditure (PCE) contributed 0.73 percentage points to growth (2.75 percentage points in the previous period) and rose 1.1 percent (4 percent in the previous period). Services (2.1 percent compared to 2.3 percent in the previous period) and nondurables (0.1 percent compared to 4.8 percent) slowed and spending on durable goods shrank 3.3 percent, following a 13.7 percent rise in the previous quarter.
Additionally, fixed investment added 0.76 percentage points to growth (1.31 percentage points in the previous period) and increased 4.6 percent (8.2 percent in the previous period). Investment slowed for equipment (4.7 percent compared to 11.6 percent) and stalled for residential (12.8 percent in the previous period). On the other hand, it rose faster for structures (12.3 percent compared to 6.3 percent) and intellectual property products (3.6 percent compared to 0.8 percent).
Private inventories added 0.43 percentage points to growth after subtracting 0.53 percent in the previous period.
Meanwhile, both exports (4.8 percent compared to 7 percent) and imports (2.6 percent compared to 14.1 percent) eased. As a result, the impact from trade was 0.2 percent, better than -1.16 percent in the previous period. This balance could get worse and more tariffs are imposed on US imports from other countries and more countries, in turn, impose larger tariffs on US exports.
Government spending and investment added 0.2 percentage points to growth (0.51 percentage points in the previous period). It increased 1.2 percent, compared to 3 percent. Expect this part of the equation to keep rising -- lower taxes mean lower government revenues, however they are spending more so this is a not a sustainable solution.
Below is a chart showing the progression of GDP changes over the past three years:
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