U.K. GDP growth slows more than expected in first quarter

Real GDP fell short of the median forecast of economists surveyed by Bloomberg, which called for a 1% gain.

A downturn in businesses' restocking their shelves and warehouses also weighed on economic output. Wage growth is picking up and job growth has been strong in recent years. Economists at Macroeconomic Advisers expect that a lackluster performance of around 0.5 percent annual growth in the first quarter will be followed by a 3.6 percent gain in the second quarter. "It ends up being an estimate and a lot of them are not perfect". This means that while the United States economy might be tumbling into a period of stagflation, the central bank still has the opportunity to continue raising base interest rates, making fiscal stimulus an urgent necessity.

The White House has been promising a return to three percent economic growth, which it says will generate the revenue needed to pay for multi-trillion-dollar tax cuts unveiled this week. The report showed that wages and benefits paid to USA civilian workers grew steadily in the first three months of the year. Imports, meanwhile, which are a subtraction in the calculation of GDP, grew 4.1 percent, compared with a 9 percent increase the previous quarter. GDP hasn't seen growth of that magnitude since before the financial crisis.

Finally, government spending subtracted 0.30 percentage points from real GDP, ending two quarters of positive contributions, with reduced spending at all levels. Final sales of domestic product finished above the overall mark, indicating that inventory exhaustion will force more growth next quarter, but even that only grew 1.6%.

Trump has said his plans for better trade deals, tax and healthcare reform as well as a reduction in regulations could push economic growth up into the 4 percent range.

"In recent years there is a well-established pattern of GDP growth disappointing in the first quarter and then rallying over the remaining three quarters". In the last quarter of 2016, consumption rose by 3.5 percent. In sum, residential and nonresidential fixed investment contributed 1.62 percentage points to headline GDP.

While some of the slowdown may be temporary, inflation is eating into consumers' wallets.

Despite the gloomy growth figures, job growth was strong in January and February before slowing in March, and the unemployment rate is at a almost decade-low of 4.5 percent.

The Commerce Department released estimates Friday showing that the economy is growing more slowly than it has in years.

Also dragging on the economy was the value of new inventories, which increased by only $10.3 billion in the first quarter, down from an increase of about $50 billion at the end of a year ago.

A recovery in oil prices helped sustain growth in this category, with mining, exploration, shafts and wells skyrocketing by 449 percent, an all-time record, up from 23.7 percent in the prior quarter.

In the 87 years from 1930 through 2016, the longest stretch of years in which the annual growth in real GDP never dropped as low as 2.7 percent was the seven years from 1983 through 1989. State and local outlays fell at a 1.6 percent annualized rate, while spending by federal agencies dropped at a 1.9 percent pace.

  • Zachary Reyes