The U.S. economy wasn’t quite as sluggish as originally reported in the first quarter but growth still fell well short of President Trump’s goal and hopes of a sharp rebound in the second quarter may be fading.
The Commerce Department said gross domestic product grew at a rate of 1.2% in the January-March period, an upward revision from the 0.7% reading in its first estimate, which was the worst performance in a year.
The upgrade reflected in part an increase in consumer spending to an annual rate of 0.6%, still the slowest in seven years but up from an initial estimate of 0.3%.
Some economists still believe that growth in the current April-June quarter will rebound sharply to above 3%, citing stronger consumer spending and an unemployment rate that has fallen to a decade low of 4.4%. Wage growth in the first quarter was the fastest in 10 years.
“Growth is bouncing back in the second quarter,” Gus Faucher, chief economist at PNC, told the Los Angeles Times. “Consumer spending continues to expand with job and wage gains, and business investment is picking up, especially for energy-related industries.”
But others are skeptical. “Economic indicators so far aren’t entirely convincing on a second-quarter bounce in activity and show a U.S. economy struggling to surprise on the upside,” Scott Anderson, chief economist at Bank of the West in San Francisco, told Reuters.
During the 2016 presidential campaign, Trump vowed to lift annual GDP growth to 4%, but the economy still seems to be growing at the same modest pace that has marked the recovery from the recession.
“Hopes of a sharp rebound [in the second quarter] have been tempered by weak business spending, a modest increase in retail sales last month, a widening of the goods trade deficit and decreases in inventory investment,” Reuters said.
The latest GDP report showed that the acceleration in business spending equipment was not as fast as previously estimated, rising at a 7.2% rate in the first quarter rather than the 9.1% reported in April.