US economy expanded by 2.3% in Q1 2018

The US economy expanded by an annualized rate of 2.3% in the first quarter of 2018, according to the Commerce Department.

The economy was dragged down by a pullback in consumer spending.

Consumer spending, which accounts for more than two-thirds of the economy, eased to 1.1% – the slowest pace since Q2 2013 – after spending grew by 4% in the previous quarter.

The Commerce Department said that the increase in real GDP in the first quarter reflected positive contributions from nonresidential fixed investment, personal consumption expenditures (PCE), exports, private inventory investment, federal government spending, and state and local government spending.

The figure is higher than the 2% growth economists had forecast but is lower than the 2.9% growth reported in the previous quarter.

The inflation rate increased to 1.8% from 1.7% year over year, a reflection of the recent uptick in prices.

Paul Ashworth, chief US economist at Capital Economics, said in a research report that the quarterly results was a “slight disappointment since the tax cuts should have provided an immediate boost,”

Analysts predict growth will pick up in the next quarter workers see the impact of the $1.5 trillion income tax package have a positive impact on their pay.

Nancy Curtin, chief investment officer at Close Brothers Asset Management, was quoted by the BBC as saying: “These weaker first quarter growth figures are unsurprising in the context of historic seasonal weakness of this quarter in the US, exacerbated by severe weather. We should not be disheartened.”

“Earnings have stabilised, and the benefits of last year’s tax reforms are starting to materialise, though the actual spending of money will take time,” Curtin added.

 

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