U.S. economic growth accelerated in the first quarter, but inflation pressures w...
WASHINGTON - U.S. economic growth accelerated in the first quarter, but inflation pressures were much weaker than initially thought, supporting a recent decision by the Federal Reserve to suspend further rate increases.
The U.S. central bank early this year suspended its three-year monetary policy tightening campaign, dropping forecasts for any interest rate increases this year. The Fed raised borrowing costs four times in 2018. While the government trimmed its initial estimate for inventory investment, export growth was raised. These two volatile components were the key drivers of the rise in GDP in the first quarter.
The current slowdown in growth largely reflects the fading stimulus from the Trump administration’s hefty tax cuts and spending increases last year. A trade war between the United States and China is also seen hurting the economy. Growth estimates for the second quarter are below a 2.0% pace. The average of GDP and GDI, also referred to as gross domestic output and considered a better measure of economic activity, increased at a 2.2% rate in the January-March period, up from a 1.3% growth pace in the fourth quarter.Export growth in the first quarter was revised up to a 4.8% rate, outpacing an upgrade to imports. As a result, trade added 0.96 percentage point to GDP rather than the 1.03 percentage points estimated last month.
Growth in consumer spending, which accounts for more than two-thirds of U.S. economic activity, was revised up to a 1.3% rate. Consumer spending was previously reported to have increased at a 1.2% pace in the first quarter.
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