U.S. first-quarter growth revised a touch lower
WASHINGTON (Reuters) – U.S. financial progress slowed barely greater than initially thought within the first quarter amid downward revisions to stock funding and shopper spending, however a sturdy labor market and earnings tax cuts are more likely to enhance exercise this 12 months.
Different knowledge on Wednesday confirmed non-public employers sustaining a gentle tempo of hiring this month and the products commerce deficit falling in April. The reviews added to stable April knowledge on retail gross sales, enterprise spending on gear and industrial manufacturing.
Gross home product elevated at a 2.2 % annual charge, the Commerce Division mentioned in its second estimate of first-quarter GDP, as an alternative of the beforehand reported 2.Three % tempo.
The financial system grew at a 2.9 % charge within the fourth quarter. Economists count on a $1.5 trillion earnings tax minimize package deal, which got here into impact in January, will spur quicker financial progress this 12 months and elevate annual GDP progress near the Trump administration’s Three % goal.
The federal government reported that after-tax company earnings surged at a 5.9 % charge final quarter after growing at a 1.7 % tempo within the fourth quarter.
That was the quickest tempo of progress in earnings because the first quarter of 2016 and mirrored a lift from the discount within the company tax charge to 21 % from 35 %. In line with the Commerce Division, taxes on company earnings decreased $117.Four billion within the first quarter.
The tax code revamp additionally bolstered dividends obtained from the remainder of the world. Wages and salaries elevated $119.5 billion within the first quarter, an upward revision of $3.1 billion from earlier estimates.
Because of this, gross home earnings (GDI) an alternate measure of financial progress elevated at a 2.eight % charge within the January-March quarter. GDI rose at a 1.Zero % tempo within the fourth quarter.
The typical of GDP and GDI, additionally known as gross home output and thought of a greater measure of financial exercise, elevated at a 2.5 % charge within the first quarter. That adopted a 2.Zero % charge of progress within the prior interval.
Economists had anticipated first-quarter GDP progress can be unrevised at a 2.Three % tempo. The greenback was buying and selling decrease towards a basket of currencies and costs for U.S. Treasuries have been down. U.S. inventory index futures have been greater.
WEAK CONSUMER SPENDING
Progress in shopper spending, which accounts for greater than two-thirds of U.S. financial exercise, braked to a 1.Zero % charge within the first quarter, reasonably than the beforehand reported 1.1 % tempo.
That was the slowest tempo because the second quarter of 2013 and adopted the fourth quarter’s strong 4.Zero % progress charge. However the fundamentals for shopper spending stay sturdy.
The ADP nationwide employment report on Wednesday confirmed non-public sector payrolls elevated by 178,000 jobs in Could after rising 163,000 in April.
Within the first quarter inventories elevated at a $20.2 billion charge, as an alternative of the $33.1 billion tempo estimated final month. Stock funding contributed 0.13 share level to GDP progress as an alternative of 0.43 share level.
The smaller stock accumulation bodes properly for GDP progress within the second quarter. The commerce deficit within the first three months of the 12 months was a bit larger than initially thought. Commerce was impartial to GDP progress. It was beforehand reported to have contributed 0.20 share level to output.
Commerce may contribute to GDP progress within the second quarter, In one other report on Wednesday, the Commerce Division mentioned the products commerce deficit fell 0.6 % to $68.2 billion in April. Each items exports and imports fell final month.
Enterprise spending on gear was revised as much as a 5.5 % progress charge within the January-March quarter from the 4.7 % tempo estimated final month. That was nonetheless a moderation in funding following double-digit progress within the second half of 2017.
Funding in homebuilding fell at a 2.Zero % charge within the first quarter as an alternative of being unchanged as reported final month.
Reporting by Lucia Mutikani; Enhancing by Andrea Ricci