US economy scores strong first-quarter growth – thanks to various one-time factors

In the first quarter, the US economy grew a massive 3.2 percent if extrapolated for the year as a whole. The market consensus had, by contrast, been that the increase would come to about two percent. However, distortions in foreign trade and renewed stockpiling of inventory provided a one-time upward boost as did public sector expenditure. In the current and in coming quarters, these factors will probably turn around and then place a drag on growth. In other words, a similarly brisk pace is hardly to be expected for the further course of the year. The latest GDP data from the United States should nevertheless not be treated as a fake bubble or some “deceptive illusion”. Even without the one-time factors, economic growth is still robust – despite the government shutdown, the unprecedented cold snap at the beginning of the year, and the muted global economy.

In the final instance, the Fed is likely to see these results as corroborating its change in monetary policy tack. Evidence, for example, would be the stagnation in investments in plant and machinery. We consider the restrained growth in private consumer spending in Q1 to be less of a cause for concern. On the one hand, this trend usually occurs at the beginning of a year (despite the usual seasonal adjustments) and, on the other, the temporary shutdown of some federal agencies and the icy winter weather both served to brake consumer zest. For this reason, much would suggest private consumer spending will act as the main economic driver during the rest of the year and ensure sound US economic growth. The high level reached by the sentiment indicators and prime labour market conditions also point in the same direction.

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