The verdict is in: Q1 GDP growth was tepid.
And the lack of ‘consumer spending’ was a primary cause.
Much like a snowball picks up size and speed rolling down a steep slope, so do negative economic events. This is why we pay such close attention to consumer confidence and expectation.
Taking action: Read on. Get a good grasp of these concepts.
The BLOG: In the first estimate by the BEA, real Q1 2017 GDP growth was a paltry 0.7%. Even lower than I expected. It may be adjusted up, when the BEA releases their second estimate on May 26th, but by any measure, this is a weak showing.
Looking closely at the numbers, its easy to see the culprit: “Personal Consumption Expenditures,” or PCE for short, grew by only 0.3% for the quarter. The biggest drag: ‘Durable Goods’ which declined by 2.5%. By my account, much of this decline can be attributed to weaker auto sales. Which, historically, is not a good sign. If it continues.
Ironically, while consumer spending (PCE) was only lukewarm at best, consumer attitudes are high as a kite!
Consumer sentiment and expectations are all higher than last month and a year ago. Yet spending was down.
Said another way, in the aggregate it appears consumer action is not aligned with consumer beliefs. Which is unusual.
And this dis-alignment suggests consumer spending – and thus the PCE – will likely swing higher in Q2. Thus, I suspect this Q1 dip is only a short-term aberration. I am not yet concerned that this weak showing is a harbinger of trouble ahead. Not yet.
We’ll see. 🙂