James Smith, developed markets economist at ING, notes that the US quarterly pace of growth accelerated to 3.2% annualised, up from 2.2% in the fourth quarter of 2018, while the overall growth mix was fairly broad-based, although a few key trends stand out.
“Firstly, consumer spending slowed to around half the pace of growth recorded in 4Q18. That may be partially related to the government shutdown, but equally the boost from last year’s tax cuts is beginning to fade. That said, there are good reasons to expect consumer spending to perform solidly over coming months. The jobs market is strong, and with skill shortages emerging in different parts of the economy, wage growth has been accelerating.”
“Unsurprisingly, trade made a strong contribution to the overall growth number.”
“The bottom line is that there are some growth-positive factors at play here that are unlikely to persist into the second quarter. Having said that though, we continue to expect a solid performance from the US economy this year, particularly if we get some more encouraging news from the US-China trade talks. While we don’t expect the Fed to hike rates again this year, we think it looks pretty unlikely that rate cuts are on the horizon at this stage.”