U.S. economy growing much faster than expected

3.4% growth for first three months of 2019.

Posted: Apr 26, 2019 8:20 AM

WASHINGTON (AP) — The U.S. economy grew at a solid 3.2% annual rate in the first three months of the year, a far better outcome than expected, overcoming a host of headwinds including global weakness, rising trade tensions and a partial government shutdown.

The advance in the gross domestic product, the broadest measure of economic health, marks an acceleration from a 2.2% gain in the previous October-December period, the Commerce Department reported Friday. However, about half the gain reflected two factors not expected to last — a big jump stockpiling by businesses and a sharp contraction in the trade deficit.

Still, the GDP gain surpassed the 3% bar set by President Donald Trump as evidence his economic program is working. Trump is counting on a strong economy as he campaigns for re-election.

It was the strongest first quarter growth rate since 2015. In recent years, GDP has been exceptionally weak in the first quarter. There had been fears growth could dip below 1% this year due to a variety of adverse factors such as the December stock market nosedive, rising weakness in key economies overseas, the U.S. trade war with China and a 35-day partial government shutdown that ended in January.

But the economy shrugged off those concerns, helped by an announcement in early January from the Federal Reserve that after raising rates four times last year, it was declaring a pause on further rate hikes. That spurred a stock market rebound by easing concerns that the central bank might overdo its credit tightening and send the country into a recession.

Still, economists believe the current April-June quarter will not match the first quarter's performance. Many are looking for GDP growth to slow to around 2% in the current quarter.

In the first quarter, inventory rebuilding added 0.7 percentage point to growth, while a falling trade deficit boosted growth by a full percentage point. Analysts think both of those factors will reverse in the current quarter.

Consumer spending, which accounts for 70% of economic activity, slowed to growth at a rate of just 1.2% in the first quarter. In particular, spending on durable goods fell at a rate of 5.3%, the biggest decline in a decade, led by a sharp drop in light truck sales.

Government spending was up 2.4% as a big 3.9% gain in state and local spending, reflecting increases in highway construction, offset a flat performance for the federal government. The government estimated that the 35-day partial federal shutdown trimmed 0.3 percentage point from growth in the first quarter after trimming fourth quarter growth by 0.1 percentage point.

For the year, economists believe GDP will expand 2.4%, down from last year's 2.9% gain, as the boost from the 2017 tax cuts and increased government spending over the past two years start to fade.

The consensus view of private forecasters is well below expectations of the Trump administration which contends that its economic policies have broken a decade-long period when GDP gains averaged 2.2% annually. The administration is predicting growth will top 3% in coming years.

There are factors that could help lift growth in coming quarters. The global economy appears on better footing, given improvements in such major economies as China, and a trade war between the world's two largest economies that appears closer to being resolved than it did at the start of the year.

Mark Zandi, chief economist at Moody's Analytics, said he expects growth for this year to be around 2.2%, close to the average for the past 10 years.

"We got a temporary boost to growth last year because of the tax cuts but that money has been spent so we are back to the kind of growth we have had," Zandi said. "I think we are back to the 2% world we have been in since the recession ended."

The current recovery from the Great Recession of 2007-2009 is currently the second longest in history and will become the longest if it lasts past June.

But it has also been the slowest in the post-World War II period, a development economists attribute to slower growth in the labor force and weak gains in productivity.

Minnesota Coronavirus Cases

Data is updated nightly.

Cases: 921249

Reported Deaths: 9678
CountyCasesDeaths
Hennepin1797812046
Ramsey744701052
Dakota68081589
Anoka64523585
Washington40846364
Stearns33805283
St. Louis29764413
Scott26116187
Wright26105223
Olmsted22502130
Sherburne19117128
Carver1677569
Clay12183107
Blue Earth1154270
Rice11505139
Crow Wing11275124
Chisago999580
Kandiyohi9861108
Otter Tail9860129
Benton9098126
Beltrami819598
Goodhue816899
Douglas7929101
Itasca777299
Mower736349
McLeod718284
Winona711658
Isanti704785
Steele689234
Morrison675380
Becker630474
Polk606187
Freeborn564847
Carlton549875
Mille Lacs535179
Lyon530961
Nobles526954
Nicollet525661
Pine517943
Cass503253
Todd494143
Brown471760
Le Sueur460534
Meeker435459
Martin388244
Wabasha377410
Waseca375933
Dodge364312
Hubbard356049
Roseau318631
Fillmore307415
Wadena304740
Redwood282145
Houston272417
Renville269851
Faribault259435
Sibley254417
Pennington253430
Kanabec251837
Cottonwood231232
Aitkin223751
Chippewa221242
Pope209410
Watonwan200021
Yellow Medicine189223
Rock178229
Koochiching177825
Swift173423
Stevens169311
Jackson161716
Clearwater158721
Marshall154222
Murray152711
Pipestone150529
Lake133624
Lac qui Parle123525
Wilkin121516
Mahnomen106414
Norman10569
Grant101810
Big Stone9555
Lincoln8885
Kittson73623
Red Lake71610
Traverse6076
Unassigned569124
Lake of the Woods5265
Cook3131

Iowa Coronavirus Cases

Data is updated nightly.

Cases: 527597

Reported Deaths: 7379
CountyCasesDeaths
Polk81677809
Linn32838430
Scott27126295
Black Hawk22334382
Woodbury20736263
Johnson20150108
Dubuque18996243
Pottawattamie16215214
Dallas15573115
Story1398059
Warren8637107
Cerro Gordo8141125
Clinton7928115
Webster7419124
Des Moines7153106
Marshall675494
Muscatine6717117
Wapello6546145
Jasper630591
Sioux622477
Lee5977106
Marion567697
Buena Vista503449
Plymouth493388
Henry427155
Benton414760
Jones413564
Bremer403873
Boone397042
Washington395464
Carroll373355
Mahaska372366
Crawford355647
Jackson324047
Dickinson317555
Buchanan312743
Delaware303255
Clay297636
Kossuth293477
Fayette290356
Hardin289253
Tama282878
Page276133
Wright270050
Cedar269527
Winneshiek267744
Hamilton262757
Floyd261049
Clayton252360
Poweshiek242043
Harrison240979
Madison237425
Butler237346
Cass235667
Iowa234336
Jefferson228544
Mills225330
Hancock222840
Winnebago222339
Cherokee217347
Appanoose210157
Lyon209842
Allamakee209456
Calhoun199519
Shelby199542
Union197141
Unassigned18890
Humboldt188231
Franklin188031
Grundy186137
Chickasaw184522
Mitchell184343
Emmet180146
Louisa178653
Sac175626
Guthrie169338
Clarke163629
Montgomery163146
Keokuk152639
Palo Alto152332
Howard150624
Monroe144340
Ida134141
Greene128818
Davis126825
Lucas126127
Monona124940
Worth12309
Pocahontas122125
Adair118239
Osceola105718
Decatur104813
Taylor100914
Fremont98913
Van Buren95922
Wayne86125
Ringgold78429
Audubon77617
Adams5869
Rochester
Partly Cloudy
31° wxIcon
Hi: 46° Lo: 29°
Feels Like: 23°
Mason City
Partly Cloudy
27° wxIcon
Hi: 51° Lo: 28°
Feels Like: 18°
Albert Lea
Partly Cloudy
28° wxIcon
Hi: 47° Lo: 29°
Feels Like: 22°
Austin
Partly Cloudy
30° wxIcon
Hi: 47° Lo: 30°
Feels Like: 21°
Charles City
Partly Cloudy
28° wxIcon
Hi: 51° Lo: 28°
Feels Like: 20°
Tracking cold and snow for next week
KIMT Radar
KIMT Eye in the sky

Community Events