Fox’s Legendary Hypocrisy Is On Full Display With Today’s Underwhelming GDP Report

Consumer spending grew only 0.3 percent, reflecting a steep drop from the 3.5 percent gain at the end of 2016.

Reduced business investment in inventories and government spending cuts also crimped gross domestic product growth.

Traders pinpointed the problem with the GDP as slow consumer spending.

The Fed is not expected to raise interest rates next week. Analysts surveyed by Reuters expected growth of 1.2 percent last quarter. On Friday, April 28, 2017, the Commerce Department issues the first of three estimates of how the USA economy performed in the January-March quarter.

The latest economic data indicate the US economy is growing at the slowest rate in three years. That would be in line with the mediocre performance of the eight-year economic expansion, when growth has averaged just 2.1 percent, the poorest showing for any recovery in the post-World War II period.

First-quarter GDP also tends to underperform because of difficulties with the calculation of data that the government has acknowledged and is working to rectify. Weak inventory investment dragged down the overall number in GDP growth by almost a percentage point. While that contribution was rather paltry, it was significantly better than the 1.82 percentage point subtraction from net exports to the headline number in the fourth quarter. This puts it on a path to meet the Fed’s expectations for 2.1% expansion this year.

The report contains the first official estimates of economic growth under Trump and was coincidentally released on the 99th day of his new administration. Business spending in the residential segment added another 0.5pc to the economic growth.

A drop in vehicle sales largely held down consumption, which subtracted 0.45 percentage points from the growth rate. The slowdown was a result of less spending on long-lasting goods like computers and kitchen appliances, motor vehicles, clothing, and energy. In the fourth quarter the core PCE rose at just a 1.3 percent rate, so the year-over-year change is still just 1.7 percent. And it offset other positive developments, including a pickup in business investment and a rise in US exports. It grew at a 0.9 percent rate in the previous quarter. During that seven-year span, the slowest annual growth in real GDP was 3.5 percent-a level it hit in both 1986 and 1987.

Final sales to private domestic purchasers – which strip out government agencies, inventories and trade – rose at a 2.2 percent pace after a 3.4 percent advance. Government spending decreased by a seasonally adjusted and annualized $12.4 billion. Putting more money in the hands of consumers rather than stoking business investment (which is already high – a “9.4% pace, the biggest jump since late 2013”) should be a priority.

The report also showed price pressures were picking up. Higher inflation, with the personal consumption expenditures price index averaging 2.4 percent – the highest since the second quarter of 2011 – was also a drag.