United States growth of 2.3 per cent slows but beats forecasts

Workers build an apartment and retail complex in Nashville, Tenn., in October.

The San Francisco Federal Reserve even published a 2015 report about the "puzzle of weak first-quarter GDP growth" that suggested sluggish data to start the year was more of a statistical problem than a signal of a struggling economy.

The continued rebound by treasuries came following the release of a report from the Commerce Department showing a slowdown in the pace of US economic growth in the first quarter.

According to the Commerce Department, GDP increased at a 2.3% annual rate, above the 2% analysts polled by Reuters were expecting. First quarter GDP has been an anomaly in recent years, showing sharply lower figures than the rest of the year. This growth is somewhat slower than in the prior three quarters, however, a better performance than was expected. Individual tax cuts should add to consumer spending power later in the year, as could accelerating wage growth particularly with the pickup in today's Employment Cost Index data.

The Trump administration has promised 3 percent GDP growth or better, due in large part to the tax cuts that were passed late a year ago.

A separate report Friday found that US private sector workers saw their wages go up 1 percent in the first quarter, the biggest quarterly gain in 11 years, a sign that the tight job market is beginning to lift wages.

U.S. President Donald Trump delivers a speech at the World Economic Forum. Trump said he had discussed with Merkel the trade deficit the United States runs with Germany and other European countries and both leaders had agreed "we want to make it more fair".

2026 period, a number of factors dampen economic growth: higher interest rates and prices, slower growth in federal outlays, and the expiration of reductions in personal income tax rates.

Consumer spending in the last quarter was likely held back by delayed tax refunds and impact of tax cuts. Now it figures growth will be 3.3% - a significant upward revision.

Trump argued that his $1.5tn tax cuts would boost US GDP to above 3% - ending years of lackluster growth in the wake of the last recession. Private economists, however, are anxious that these efforts will run up against weak growth in the labor force as many baby boomers retire and lackluster gains in productivity. That's slower than the 2.9% pace in the fourth quarter of 2017.

The economy's stronger growth in the past year as a whole appears to be adding to inflation pressures. If it lasts through June of 2019, it will become the longest expansion in history, surpassing the 10-year recovery of the 1990s. The government will publish its snapshot of first-quarter GDP on Friday at 8:30 a.m. (1230 GMT).

Government spending slowed significantly too, dropping from 3% in 2017Q4 to 1.2% in this report, but business investment increased significantly, going from 4.7% growth in the previous quarter to 7.3% growth in this report. Goods exports increased 6.1 percent in the first quarter, which was more than enough to offset the 2.1 percent rise in goods imports.

The housing sector stagnated in early 2018 as residential investment was flat, a development that likely reflected higher short-term interest rates and tax-code changes that diminished decades-old perks that encouraged homeownership.


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