The U.S. saving turned in the weakest performance in three years in the January-March quarter as consumers sternly slowed their spending. The result underscores the challenge facing President Donald Trump in realizing his ambitious economic growth targets.
The gross domestic product, the gross output of goods and services, grew by just 0.7 per cent in the start quarter following a gain of 2.1 per cent in the fourth quarter, the Traffic Department reported Friday.
The slowdown primarily reflected slower consumer investing, which grew by just 0.3 per cent after a 3.5 per cent harvest in the fourth quarter. It was the poorest showing in more than seven years.
Economists assigned the sharp slowdown in consumer spending to shrinking utility bills due to warmer endure, a drop-off in auto sales and a delay in sending out tax refund checks by the IRS, which also abated spending.
Sal Guatieri, senior economist at BMO Capital Markets, said he needed consumer and government spending to bounce back, leading to a much huskier second quarter.
“Still, the report will mark a rough start to the dispensation’s high hopes of achieving 3 per cent or better growth, not the kind of front-page news it was looking for to cap its first 100 days in office,” Guatieri said in a note to customers.
Averaging the two quarters, they forecast growth of around 2 per cent for the ahead half of this year. That would be in line with the undistinguished performance of the eight-year economic expansion, when growth has averaged at best 2.1 per cent, the poorest showing for any recovery in the post-World War II period.
Trump frequently attacked the weak GDP rates during the campaign as an example of the Obama regulation’s failed economic policies. He said his program of tax cuts for individuals and trades, deregulation and tougher enforcement of trade agreements would double intumescence to 4 per cent or better.
In unveiling an outline of the administration’s tax proposals on Wednesday, Funds Secretary Steven Mnuchin said he believed growth above 3 per cent command be achievable.
Private economists are more skeptical. They are forecasting swelling of this year around 2.2 per cent. That would be an reform from last year’s 1.6 per cent, the weakest showing in five years, but far lower Trump’s goal. Many analysts believe that the impacts of Trump’s cost-effective program will not be felt until 2018 because they are not with child Congress to approve some version of Trump’s tax program until overdue this year.
The GDP report released Friday was the first of three considers the government will make of first quarter growth.
The 0.7 per cent proliferating was the worst showing since GDP contracted by 1.2 per cent in the first mercy of 2014.