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GDP growth broke expectations at the beginning of 2019. But economists say the recovery is unlikely to last.




  US Flag Builders David McNew / Getty

  • The pace of economic growth flew beyond expectations in the first quarter.
  • But the broad reading can have masked pockets with weakness in the economy.
  • Perhaps mostly for economists, a less volatile target for the private sector came in surprisingly weak in the first quarter.

Gross domestic product, a measure of all goods and services produced in the country, grew at a much faster pace than expected in the first quarter. But the broad reading can have masked pockets with weakness in the economy.

"It is fair to say that today's headline pressure exaggerates the strength of the economy," said Eric Winograd, a senior US economist at the investment company AllianceBernstein, on Friday.

Factors that raised GDP 3.2% from the year before are not expected to last The economists said a strong jump in exports, for example, is mainly due to companies rushing orders ahead of planned escalations in the ongoing trade war between Washington and Beijing.

"Put a star next to it as the first quarter expansion driven by unsustainable inventory accumulation, temporary narrowing of the trade deficit and a one-time increase in government-sponsored construction, says Joe Brusuelas, CFO of RSM, a financial consulting firm.

Underlying data in the Friday report pointed to reducing consumption and investment, while supporting widespread expectation of growth slowly over the coming months. The key figures for inflation were actually lower, while the price index for personal consumption was well below the Federal Reserve target of 2%.

Perhaps mostly for economists, a less volatile target for the private sector came in surprisingly weak in the first quarter.

Real sales to private domestic buyers, which exclude government purchases, fell to six-year lows of 1[ads1].3% between January and March. This was compared with 2.6% at the end of 2018 and marked a third straight quarter with a decline.

"Statistically, this is a better prerequisite for future GDP prints," Jason Furman, who headed the Obama White House council advisers, said on Twitter . He added that the measure omitted the actual data that increased Friday's headline estimate.

Still, from a global trade war to a slowdown abroad, the US economy seemed to show resistance to a number of tribes in the first quarter. The report helped combat concerns that the long-term economic expansion has run out of steam and suggested forecasts of an impending downturn, overblown.

Hours after Friday's report, the White House financial adviser Larry Kudlow called the Federal Reserve again to cut interest rates. The Federal Open Market Committee is not expected to adjust the interest rate throughout the year, but officials have penciled for at least one turn in 2020.

"One thing is for sure: there is no way FOMC will cut prices on the heels of this report," Ken Kuttner said. , a former Fed employee now economist at Williams College. "You have to see a significant unwanted shock, or several months worth of bad numbers before the cuts should be on the table."



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