The end of March marked the end of the first quarter of 2018 which means that, about a month later, the initial estimates of quarterly (or annualised in the case of the USA) growth are emerging. The estimates coming out now are based on partial data and will be subject to two further revisions as more comprehensive data becomes available. First out of the blocks (well my blocks anyway) is the US economy.
The USA presents its quarterly growth on an annualised basis. The Commerce Department has revealed that the US economy’s growth has slowed to 2.3% in Q1 2018, down from the Q4 2017 level of 2.9%
Domestic consumption is usually the dominant term in any economy; in the USA it accounts for almost 70% of the total. The growth in consumer spending stood at 1.1% in Q1 which marked its weakest level of growth since Q2 2013. It is in stark contrast to the 4% growth figure in consumer spending in the previous quarter. It has been argued that the bumper Q4 consumer spending growth was due to repair work following on from a strong hurricane season which wrought significant damage; therefore, the dip in Q1 can be partially explained since it is a relative measure. The relative weakness of consumer demand has been blamed for the weakening growth experienced by the US economy. The trend was exacerbated by subdued purchasing of equipment by US businesses.
The Q1 growth, whilst subdued, was better than some analysts had predicted, anticipating that it would only come in at 2%. The Federal Reserve is Bullish about the economy, believing that the relative Q1 growth will be transitory. On this basis, it is thought that the Fed will make good its plans for a further two 0.25% interest rate hikes before the end of the year, although pundits expect the next meeting of the Fed (next week) will adopt a “wait and see” policy.