Markets

Trade, inventories power US economy to 3.2 percent growth in first quarter

Trade, inventories power US economy to 3.2 percent growth in first quarter

That could restrain growth in the second quarter.

The economy grew at a 2.2-percent pace in the October-December period.

The US economy got off to a roaring start in 2019, breezing past President Donald Trump's extended government shutdown and wiping away fears of a slowdown in growth, at least for now, the government reported Friday.

Though stock markets and the White House enthusiastically greeted the Federal Reserve's January announcement that it would not increase interest rates, claiming it would unshackle the economy, economists are less bullish than Trump in terms of their annual forecasts. The economy will mark 10 years of expansion in July, the longest on record.

First-quarter GDP expanded by 3.2% in the first quarter, the Bureau of Economic Analysis said.

Economists had predicted the federal government shutdown and bad winter weather would be a drag on first quarter growth, which many estimated would be around 2.3 percent.But the rise in business inventory investments, as well as increased exports and state and local government spending, pushed the nation's GDP higher than predicted.

"One thing is for sure: there's no way the FOMC is going to cut rates on the heels of this report", said Ken Kuttner, a former Fed staffer who is now an economist at Williams College.

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It also submitted data to show that making a delivery with one of its drones carries lower risks than using a vehicle . Wing worked to prove not only that drone delivery was safe - but that it was actually safer than the alternatives.

It was the strongest first quarter growth rate since 2015.

Echoing Swonk, Jason Furman, previously an economic adviser for former President Barrack Obama and a professor at Harvard University, tweeted that despite the 3.2 percent surge, "the underlying data is much weaker and is consistent with a slowing economy".

Friday's report showed net exports added 1.03 percentage point to growth while rising private inventories added 0.65 point. In the final three months of past year, GDP came in at 2.2%.

Trade helped to boost growth in the first quarter, as exports rose while imports fell. Commerce said the closure also chopped the fourth quarter by 0.1 point, while adding that the full effects can't be quantified. Trade tensions between the United States and China 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.

But Swonk said the economy now will have to "deplete inventories that have been built up for the better part of a year".

The US economy grew faster than expected in the first quarter of 2019, driven mostly by exports and inventories, but economists anxious that a lack of momentum domestically might drag growth in the future.


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