“Make America great again” is the most remarkable pledge of U.S. President-elect Donald Trump. These words made a lot of Americans expectant of growth and development this year. However, the GDP report for the first quarter of 2017 seems to be saying the opposite.
A sluggish start
The Gross Domestic Product of the U.S. economy increased by just 0.7% in the first quarter, following a gain of 2.1% in the fourth quarter particularly in President Barack Obama’s final three months in the office. This Trump administration welcome to the economy is said to be the weakest performance in 3 years. The economy was dragged down by weak auto-sales and the lowering of home-heating bills which dragged down consumer spending, offsetting a pickup in investment led by housing and oil drilling.
Consumer spending only grew 0.3% after a 3.5% gain in the fourth quarter. This was the poorest showing in more than seven years. The most notable caution was consumers taking a halt on big purchases like cars. Other indicators like business investments were in a good note but were not enough to lift the falling sales and inventories. The warm winter is also partly to blame since it lessened utility spending.
Although in a downward trend right now, recovery and a strong economic growth is still around the corner. Economists believe the slowdown will be temporary. They forecast GDP growth will rebound to 3% or better in the current quarter.
The jobs market has also been resilient even as quarterly growth was slow. The unemployment rate sank to 4.5% in March, the lowest in nearly a decade. In addition, job gains remain solid, gas prices are low and wage growth has been picking up after years of dormancy.
Business investments also improved as equipment spending jumped at a 9.1 percent rate. Spending on nan-residential structures also rose at a 22.1% pace while investments in home building rose at 13.7% rate. Exports also rose at a 5.8% rate, outpacing the 4.1 percent rate of increase in imports.
It’s important to caution that the first estimate for economic growth to start the year has been unusually low in recent years and has been later revised upward.
Regardless, the final number won’t change the narrative: America has a slow growth problem.