United States economy slowed in first quarter after Trump's $1.5tn tax cuts

News Release: Gross Domestic Product - Bureau of Economic Analysis

Economy grew 2.3 percent in first quarter

US economic growth dipped from its 2017 pace in the first quarter of 2018, expanding by 2.3% in the Commerce Department's initial estimate released on Friday.

In the appendix of the CBO report, it shows that, before accounting for economic growth, the tax cuts Trump signed into law late previous year would cut federal revenues by $1.69 trillion from 2018-2027. "Tax cuts will support consumer spending and business investment", while "trade is certainly a risk".

Even so, the results underline the difficulty of achieving President Donald Trump's goal of 3% sustained growth, despite corporate and individual tax cuts that went into effect in January.

For example, Greg Ip of The Wall Street Journal said in a series of tweets Friday morning that the data from the fourth quarter was likely distorted by post-hurricane vehicle purchases and home fix; excluding auto sales and residential investment results in stronger growth numbers for the first quarter.

Trade added 0.20 percentage point to GDP growth as weak a US dollar and strengthening global economy bolstered exports. In the fourth quarter, current-dollar GDP rose 5.3 percent.

Growth slowed less than most forecasters expected and beat the first quarters of 2016 (0.6%) and 2017 (1.2%).

Inflation also increased by a 2.7 percent annual rate, bringing the year-over-year rate to 1.8 percent, from 1.7 percent.

Commerce Department analysts reported worrying signs of rising prices with a key price index, excluding volatile food and energy costs, rising 2.5 percent.

Traders are also likely to keep an eye on the latest economic data, including the Labor Department's closely watched economic report due next Friday.

The first quarter tends to be weaker.

The report said the consumer sentiment index for April was upwardly revised to 98.8 from the preliminary reading of 97.8.

Business spending on equipment slowed to a 4.7 percent rate in the January-March quarter after double-digit growth in the second half of 2017. The Federal Reserve expects economic output to expand by 2.7% for the year as a whole.

After adjusting for inflation, final sales to domestic purchasers - which strip out inventories and trade - rose at a 1.6 percent pace, the slowest in two years, after a 4.5 percent advance that was the fastest since 2010. Making other adjustments to the data related to fluctuations in the oil market produce a growth estimate close to the 3 percent Republican target. Delayed tax refunds may have held down consumer spending, which is likely to rebound in the second quarter as incomes rise, he said. The slow pace has helped extend the life of the current expansion, now the second longest in US history. Inventory investment contributed 0.43 percentage point to GDP growth after subtracting 0.53 percentage point in the fourth quarter. Investment in new structures almost doubled to 12.3 percent.

The year is off to a sluggish start for the USA economy - and a decline in spending on clothing and footwear is partly to blame.

In contrast to those measures, consumer spending was a weak spot and something that it is hoped will turn around in both revisions and upcoming quarters.

At the same time, Boeing said it's seeing solid global demand, while United Parcel Service said the USA economy is showing "healthy fundamentals".

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