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Financial News: U.S. GDP Growth Unexpectedly Accelerates To 3.2% In

U.S. GDP Growth Unexpectedly Accelerates To 3.2% In Q1

04/26/2019 - 09:31:00 (RTTNews)

(RTTNews) - U.S. economic growth unexpectedly showed a significant acceleration in the first quarter of 2019, according to a report released by the Commerce Department on Friday.

Preliminary data showed real gross domestic product jumped by 3.2 percent in the first quarter after climbing by 2.2 percent in the fourth quarter of 2018.

The acceleration in the pace of growth came as a surprise to economists, who had expected GDP to increase by 2.1 percent.

Paul Ashworth, Chief U.S. Economist at Capital Economics, said the much stronger than expected GDP growth would seem to "make a mockery of claims that the U.S. economy is slowing as the fiscal stimulus fades."

"After all, 3.2% is well above the economy's 2% potential pace and the 2.2% gain in the final quarter of last year," Ashworth said. "Looking beyond the headline number, however, there are plenty of causes for concern."

The unexpected acceleration in GDP growth partly reflected a positive contribution from trade, including a 3.7 percent spike in exports.

The report also showed imports, which are a subtraction in the calculation of GDP, tumbled by 3.7 percent during the quarter.

An acceleration in private inventory investment also contributed to the faster GDP growth along with a 3.9 percent surge in state and local government spending that Ashworth described as "very suspicious."

Ashworth noted the jump in state and local government spending was almost entirely due to a spike in government investment in highways and roads.

"Taking out the over-sized boosts from net trade, inventories and highways investment, which will all be reversed in the coming quarters, growth was only around 1.0%," Ashworth said.

He added, "Under those circumstances, we continue to expect that overall growth will slow this year, forcing the Fed to begin cutting interest rates before year-end."

The Commerce Department noted the positive contributions to GDP growth in the first quarter were partly offset by decelerations in consumer spending and non-residential fixed investment and a downturn in federal government spending.

On the inflation front, the report said a reading on core consumer prices, which exclude food and energy prices, showed price growth slowed to 1.3 percent in the first quarter.

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