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NAFCU economist: GDP growth 'higher than expected,' reversal up ahead
According to the Commerce Department's first quarter initial estimate, the U.S. economy grew by 3.2 percent. NAFCU Chief Economist and Vice President of Research Curt Long noted that this report finished "higher than expected" but expects growth to cool in the coming months.
"Although a growth rate of 3.2 percent is solid and in line with figures over the bulk of the recovery, the details suggest a reversal is in store in the months to come," said Long in a NAFCU Macro Data Flash report. "The volatile inventory segment played a prominent role in first-quarter growth, which sets up a drag in the second quarter as businesses normalize stocks. Likewise, net exports has been choppy as activity ebbs and flows in response to, and in anticipation of trade tariffs.
"More promising is the consumption segment, which also beat expectations and suggests that the economy is on firmer footing than once feared. A strong labor market and improving wage growth remain supportive, and should keep the recessionary wolves at bay. NAFCU expects growth to slow modestly this year, but to remain above zero," Long added.
Contributions to growth of real GDP came from gains in consumption spending (+0.82 percent), business investment (+0.37 percent), inventory accumulation (+0.65 percent), government spending (+0.41 percent) and net exports (+1.03 percent). Residential investment reduced growth by 0.11 percent.
PCE inflation, the Fed's preferred inflation metric, decreased from 1.5 percent in the fourth quarter to 0.6 percent in the first quarter. Core PCE inflation (excluding food and energy) also decelerated from 1.8 percent to 1.3 percent over that time.