The stronger than expected GDP growth reflected positive contributions from non-residential fixed investment, consumer spending, exports, private inventory investment, and government spending. Lower corporate and individual tax rates as well as increased government spending will likely lift annual economic growth to the administration's 3 percent target, despite the weak start to the year. The United States economy, at first estimate, grew by 2.9 percent, year-over-year, in the first quarter of 2018.
Government expenditures increased at a 1.2% annual rate in the first quarter.
This first read on economic growth is, for better or for worse, being seen by some as a test of the efficacy of the Republican tax cuts.
Mr Trump has gambled that the $1.5 trillion cost of his tax cuts will be repaid in full, or better, through accelerated economic growth.
"Earnings have stabilised, and the benefits of last year's tax reforms are starting to materialise, though the actual spending of money will take time", Curtin added. That would be the slowest pace in almost five years and follows the fourth quarter's robust 4.0 percent growth rate. A measure of inflation, tied to consumer spending and excluding volatile food and energy costs, advanced at a 2.5 percent annualized pace, the fastest since 2011, adding to signs that price gains are picking up. The figure will be revised twice in the next couple of months as more data becomes available.
The slowdown in US consumer spending reflected slower auto sales as well as purchases on clothing, footwear, food and beverages, according to the report.
Apple called the new 2 reasons to switch from Android to iPhone
The app is available as a free download for iPhone and iPad with no in-app purchase required to unlock its full potential. Note: Non-genuine replacement displays may have compromised visual quality and may fail to work correctly.
Muted household spending was the catalyst for the drop-off.
Wall Street Journal Global Economics Editor Jon Hilsenrath on first-quarter GDP.
Beyond quarterly gyrations, underlying demand looks resilient, analysts said before the report. Goods exports increased 6.1 percent in the first quarter, which was more than enough to offset the 2.1 percent rise in goods imports. The Federal Reserve expects economic output to expand by 2.7% for the year as a whole. The cooling in equipment investment comes as the stimulus from a recovery in commodity prices is fading. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.3 basis points to 2.957 percent. Spending is, however, expected to rebound in the second quarter after the U.S. Congress recently approved more government spending.
Trump has predicted continuous 3 percent GDP growth and based deficit-expanding policies like tax cuts and increased spending on those levels, despite many economists saying they were unsustainable.
With consumer spending slowing, inventories increased at a $33.1 billion rate in the first quarter, up from a $15.6 billion pace in the prior period.
In the GDP report, after adjusting for inflation, final sales to domestic purchasers - which strip out inventories and trade - rose at a 1.6% pace, the slowest in two years, after a 4.5% advance that was the fastest since 2010. Nonresidential fixed investment, reflecting spending on commercial construction, equipment and software, rose at a 6.1% rate.