Was this year’s first quarter a bust for US economic growth? Current forecasts foresee a slower expansion than Americans got in 2018’s second and third quarters (4.2% and 3.4%). But at least the latest estimates were just upgraded a bit and exceed the 2.2% showing in last year’s final period.
The closely watched GDPNow forecast, which the Federal Reserve Bank of Atlanta issued Thursday, placed the growth rate for the first quarter at 2.8%, an improvement over its previous 2.4% reading. Meanwhile, JPMorgan Chase raised its estimate to 2.5% from 2.0%. The least optimistic of the lot, Goldman Sachs, upped its prediction to 2.1% from 1.7%.
The gross domestic product increase for first quarter 2019, to be released April 26 by the US Commerce Department, will come amid a muscular stock market rally this year, with the S&P 500 up around 16%.
That’s understandable, and an encouraging sign for optimists. Although last year’s robust corporate earnings are expected to flag somewhat, they aren’t headed for the basement. Plus, employment remains high and there’s anticipation of a pact to end the US-China trade war.
Truth to tell, though, the story of this economic recovery is one of ups and downs. Economists have cited many possible reasons for the phenomenon, but the manic-depressive nature of economic growth is hardly comfortable.
In 2011’s final quarter, the economy climbed a heady 4.6%. In 2012, the pace slowed, with the economy squeezing out a mere 0.1% gain in the fourth period. Then in 2014’s second and third quarters, the advances renewed their old vigor, clocking 4.6% and 5.2%—and then the numbers ebbed once more.
As oil and other commodity prices plunged worldwide, growth dwindled in 2015 and 2016, although it didn’t meet the standard definition of a recession, with two successive negative quarters. The outset of the Donald Trump presidency was uninspiring, decelerating from 3% at 2017’s start all the way to 2.2% in last year’s initial quarter.
But then the second quarter of 2018 showed a remarkable growth spurt, up 4.2%, a jump many attribute to the Trump tax cut passed in late 2017, which Democrats termed a “sugar high.” Ian Shepherdson, chief economist at Pantheon Macroeconomics, labeled the second quarter an “outlier.” Sure enough, the next two 2018 quarters came in successively weaker, at 3.4% and 2.2%.
Now let’s see if and by how much the 2019 first quarter GDP can beat that 2.2% inch-up from 2018’s last period.
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