U.S. GDP Growth Revised Up to 1.2% Rate in First Quarter--Update
May 26 2017 - 6:17PM
Dow Jones News
By Ben Leubsdorf
U.S. economic growth in early 2017 was modest but stronger than
initially thought, and the pace is picking up in the current
quarter.
Gross domestic product, a broad measure of the goods and
services produced in the U.S. economy, expanded at an inflation-
and seasonally adjusted annual rate of 1.2% in the first quarter, t
he Commerce Department said Friday.
The agency last month estimated GDP growth at a 0.7% annual rate
during the first three months of the year.
U.S. growth has averaged 2.1% a year since the recession ended
in mid-2009. Looking through quarterly fluctuations, 2017 appears
on a similar trajectory, based on recent projections by private
economists and Federal Reserve policy makers.
"The recovery continues to be perhaps uninspiring, but it's
awfully durable," said Michael Gapen, chief U.S. economist at
Barclays.
First-quarter growth has repeatedly disappointed in recent years
before rebounding in the spring and summer. This year looks set to
follow that pattern, which some economists attribute to
seasonal-adjustment problems.
Forecasting firm Macroeconomic Advisers on Friday predicted GDP
would expand at a 3.3% annual pace in the second quarter.
President Donald Trump wants to boost sustained economic growth
above 3% through a combination of tax cuts and other policy
changes. But many economists say that will be difficult given
sluggish growth in the size of the labor force and slow gains in
worker productivity.
Friday's report also offered the government's first estimate of
U.S. corporate profits during the first quarter. After-tax profits,
without inventory valuation and capital consumption adjustments,
fell 0.3% from the fourth quarter but were up 11.9% from a year
earlier.
The profits pullback came after four consecutive quarterly
gains. The Commerce Department said first-quarter profits were
depressed by legal settlements involving U.S. subsidiaries of
Credit SuisseAG, Deutsche Bank AG and Volkswagen AG.
Revisions to economic-output data for the first quarter were
largely upbeat, with stronger growth for spending by consumers and
businesses and a less-dramatic pullback in spending by governments
compared with initial estimates released last month.
Consumer spending, which accounts for two-thirds of U.S.
economic output, rose at a 0.6% annual rate, up from an earlier
estimate of 0.3% but down from fourth-quarter growth of 3.5%.
Federal Reserve officials have shrugged off weak first-quarter
spending as a temporary setback based on signs of underlying
health, such as continued hiring and elevated consumer
sentiment.
AutoZone Inc. this week reported its U.S. same-store sales fell
0.8% from a year earlier in the three months ended May 6. But the
Memphis, Tenn.-based auto-parts retailer said sales picked up in
the spring after a weak start.
"As we exited the quarter, we felt our sales trends had
normalized," Chief Executive Bill Rhodes told analysts.
Capital expenditures by U.S. businesses accelerated in the first
quarter. A broad measure, fixed nonresidential investment, rose at
an 11.4% annual rate, up from an earlier estimate of 9.4% and the
fourth quarter's 0.9% growth rate. Business spending rose broadly,
led by a dramatic 28.4% jump in spending on structures such as mine
shafts and oil wells.
A major driver of the recent investment pickup has been a
rebound in domestic energy production.
But the Commerce Department on Friday also reported an April
pullback in orders for long-lasting factory goods, a possible sign
of soft business spending on new equipment this spring.
Spending by federal, state and local governments contracted less
than earlier thought in the first quarter, falling at a 1.1% annual
pace versus a prior estimate of 1.7%. Residential investment jumped
at a 13.8% pace in the first quarter, up slightly from the initial
estimate and providing a solid boost to overall growth.
Net exports contributed 0.13 percentage point to the first
quarter's 1.2% growth rate, while private inventories subtracted
1.07 percentage point. Both categories tend to be volatile from
quarter to quarter.
Write to Ben Leubsdorf at ben.leubsdorf@wsj.com
(END) Dow Jones Newswires
May 26, 2017 18:02 ET (22:02 GMT)
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