U.S. economic growth was weaker than already lackluster expectations in the first quarter. The first quarter advance reading of real GDP growth came in at a disappointing 0.1% annualized rate, considerably lower than economists’ consensus expectations of 1.2 percent. Thursday’s weak construction spending report raises the odds that Q1 GDP could be revised lower and might have declined. The pull-back in growth came largely from a sharp 6.1 percent decline in private investment, mainly in nonresidential equipment and residential construction, and an excruciating 12.0% drop in goods exports. Severe winter weather added a significant dose of the doom and gloom. During the most recent FOMC meeting, even the Fed’s Janet Yellen blamed the “adverse weather conditions” for slowing the pace of economic growth.
Despite overall weakness in the quarter, the largest component of GDP, personal consumption, grew at solid 3.0 percent annualized rate, boosted by 4.4 percent growth of consumer services expenditures. U.S. consumers continued to spend despite the freezing winter weather in the first quarter and we expect continued momentum in consumer spending throughout 2014 given the greater than expected retail sales and auto sales figures in recent months and nine-month high Univ. of Michigan consumer sentiment readings.
Fortunately, today’s employment report, the Conference Board’s Leading Economic Indicators, retail sales, consumer confidence, Chicago PMI, and Dallas Fed Manufacturing activity figures are signaling a much stronger economy in the quarters ahead.
To find out more, check out this week’s US Outlook Report: Bank of the West US Outlook Report, May 2