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Economic Watch: GDP Revised Lower; Consumer Confidence, Employment Strong

The widest measure of U.S. economic growth was revised lower on Wednesday, according to newly released figures, while separate reports showed consumer feelings remain good and employers continue adding jobs.

Evan Lockridge
Evan LockridgeFormer Business Contributing Editor
May 30, 2018
Economic Watch: GDP Revised Lower; Consumer Confidence, Employment Strong

 

3 min to read


The widest measure of U.S. economic growth was revised lower on Wednesday, according to newly released figures, while separate reports showed consumer feelings remain good and employers continue adding jobs.

The Commerce Department’s second of three estimates of first quarter gross domestic product (GDP) performance showed it expanded at an annual rate of 2.2%, down from the 2.3% rate it reported a month earlier.

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During the fourth quarter of 2017, annual GDP performance was estimated to have expanded at a 2.9% annual rate with rates of slightly better than 3% in the third and second quarters. The GDP expanded at just a 1.2% annual rate in the first quarter of 2017.

The second estimate for the first quarter is based on more complete data, according to the department, that showed a slower increase in inventories, lower corporate taxes and a slightly bigger decrease in consumer spending that reported a month earlier.

Analysts at TD Economics said this latest performance was in line with expectations.

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“A slight downward revision to growth in the first quarter does not change the story for the economy, which involves residual seasonality holding back growth in the first quarter, but then likely to see quarterly growth of close to 3% through the remainder of the year,” said TD Economics. “Abstracting from quarterly volatility the U.S. economy grew at 2.8% on a year-on-year basis in the first quarter, well above its potential, and a marked acceleration from 2% at the beginning of last year. There is little debate that the U.S. economy has been doing very well.”

Consumer Confidence Remains High

This followed a separate report on Tuesday from the private research group The Conference Board that showed consumer confidence increased in May following a modest April decline.

The Consumer Confidence Index increased in May to reading of 128 up from 125.6 in April. The Present Situation Index increased from 157.5 to 161.7, while the Expectations Index improved from 104.3 last month to 105.6 this month.

“Consumers’ assessment of current conditions increased to a 17-year high, suggesting that the level of economic growth in second quarter is likely to have improved from the first quarter,” said Lynn Franco, director of economic indicators at The Conference Board. “Consumers’ short-term expectations improved modestly, suggesting that the pace of growth over the coming months is not likely to gain any significant momentum.”

Overall, Franco said confidence levels remain at historically strong levels and should continue to support solid consumer spending in the near-term.

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Private Sector Employers Add Nearly 180,000 Jobs During May

Meantime, a report on employment in the U.S. that was released Wednesday showed private sector non-farm employers increased payrolls by 178,000 jobs from April to May, according to payroll processor ADP.

“The hot job market has cooled slightly as the labor market continues to tighten,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “Healthcare and professional services remain a model of consistency and continue to serve as the main drivers of growth in the services sector and the broader labor market as well.”

The number of jobs added in April was revised lower from 204,000 to 163,000 jobs, making the May measure the second lowest gain since last September when there were just 84,000 job additions.

Mark Zandi, chief economist of Moody’s Analytics, said, “Job growth is strong, but slowing, as businesses are unable to fill a record number of open positions. Wage growth is accelerating in response, most notably for young, new entrants and those changing jobs. Finding workers is increasingly becoming businesses number one problem.”

The report was issued two days before numbers from the Labor Department are issued about employment in the U.S.


Related: Business Investment, Consumer Sentiment Strong as Home Sales Slip

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