Putting GDP In Perspective

The Commerce Department announced that the U.S. economy grew 2.3% year over year in the first quarter (based on gross domestic product), better than the consensus estimate of 2.0%, but beneath last quarter’s 2.9% and the 3.2% rate seen in the third quarter of 2017. On the surface, the data hardly seems encouraging, but a look under the surface suggests more optimism may be warranted.  

“As our LPL Chart of the Day shows, the first quarter has been far and away the worst quarter since 2000. However, things tend to bounce back in the second quarter, as it has been the strongest quarter over the same period,” according to Ryan Detrick, Senior Market Strategist.

One thing to note is that while consumer spending was weak, it was offset by strong business investment. Weather could also have played a role in the consumer weakness after some spending was pulled forward in the fourth quarter, likely due to post-hurricane recovery and anticipated tax gains.

“We continue to expect U.S. growth to accelerate over the rest of the year, supported by a strong job market, fiscal stimulus, business investment, and a potential rebound in consumer spending,” summarized Detrick.

 

IMPORTANT DISCLOSURES

Gross domestic product (GDP) is the monetary value of all the finished goods and services produced within a country’s borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments, and exports less imports that occur within a defined territory.

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