On Friday, the newest data from the Department of Commerce found that the U.S. economy topped 3.2 percent annualized growth in the first quarter of 2019 — a rate well beyond what experts were expecting.
President Donald Trump took a victory lap, trumpeting his skill as an economic steward to CNN reporters before an NRA event in Indianapolis. “I’m not allowed to comment,” on GDP for 10 to 15 minutes, he said, but “we’re knocking it out of the park.”
But several economists pointed out that the report conceals some bad news — it turns out that a huge amount of that growth came from one-off events that boosted trade and inventory. Underneath the total number, growth in consumer spending and business investment was much smaller — meaning that the long-term outlook is weaker.
BREAKING: US #economy grew at a 3.2% (annualized) pace in Q1 2019, best since 2015 and smashing estimates of 2.3%. Higher inventories and a smaller trade deficit helped push the number up, factors that aren't likely to last.
Q1 18: 2.2%
Q1 17: 1.8%
Q1 16: 1.5%
Q1 15: 3.3%
— Heather Long (@byHeatherLong) April 26, 2019
Don't want to be Debbie Downer but the rate of spending by consumers and businesses fell and contributions from trade and inventories to the top line may not be repeated and could reverse. https://t.co/rDxXos3Dp1
— Ben White (@morningmoneyben) April 26, 2019
And as Federal Reserve adviser Diane Swonk pointed out, the decline in consumer spending is thanks in part to Trump’s disastrous attempt to shut the government down to force Congress to fund his border wall:
Over half the whopping 3.2% GDP figure due to surge in inventories and slower trade. Imports fell. Consumer spending and business investment slowed to a crawl. Federal government flatlined in wake of gov shutdown.
— Diane Swonk (@DianeSwonk) April 26, 2019