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Economic Watch: GDP Growth Slows, Positive Signs for Trucking Remain

The U.S. economy grew at the weakest rate in three years during the first quarter of 2017, according to an advanced estimate by the Commerce Department, but economists remain optimistic about future performance.

Evan Lockridge
Evan LockridgeFormer Business Contributing Editor
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April 28, 2017
Economic Watch: GDP Growth Slows, Positive Signs for Trucking Remain

 

3 min to read


The U.S. economy grew at the weakest rate in three years during the first quarter of 2017, according to an advanced estimate by the Commerce Department, but economists remain optimistic about future performance.

The gross domestic product (GDP), which is the total measure of output of goods and services, increased at an annual pace of 0.7%, less than Wall Street expectations, and down from the 2.1% pace in the fourth quarter of 2016.

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Pulling the number lower was a big drop in consumer spending, which accounts for about two-thirds of all economic activity. It increased just 0.3%, its worst performance in seven years, and following a fourth quarter 2016 gain of 3.5%.

The Associated Press reported economists attributed the sharp slowdown in consumer spending to shrinking utility bills due to warmer weather, a dropoff in auto sales, and a delay in sending out tax refund checks by the IRS, which also dampened spending. Also government spending on both the state and federal levels fell.

On the positive side, there were increases in business investment, due in part to increased oil and gas drilling as their prices have recovered, while there were improvements in home building and non-residential construction.

American Trucking Associations Chief Economist Bob Costello noted the report also showed there was a reduction in business inventories during the quarter, which he said on Twitter will “pay dividends later for trucking” and that the increase in business investment was “another positive sign.”

Inconsistencies between the supposedly more bullish consumer and business communities versus the actual dollars and cents they are spending are plaguing the accuracy of economic reports, according to chief market strategist Brett Ewing of First Franklin.

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“It makes it impossible to predict whether this economy is peaking or just getting revved up,” he said. “While spending turned in some of the weakest numbers since coming out of the financial crisis, the employment numbers came in hot. U.S. employment costs rose the most since 2007 and wages are now rising at an annualized clip over 3%."

Ewing said one thing that was surprising was the pickup in business investment despite the uncertainty in the future of business policies that the Trump administration is targeting.

“That’s a great sign because if the environment improves, which we think it will, more investment will follow. It definitely shows a pent-up demand and willingness to invest, even in the face of a murky future,” he said.

Like many analysts, RBC Economic Research is forecasting the pace of the GDP to pick up due to the belief that consumer spending will return to a level closer to what was seen in the final quarter of 2016. Should this happen and business investment remains strong, RBC is forecasting the GDP to clock in at an annual rate of 2.5%.

The first quarter slowdown in the GDP was not entirely unexpected. In recent years, the first quarter performed poorly, due to a variety of reasons, including the government having problems adjusting its figures for seasonal changes, according to AP. It is reportedly working on the issue as part of a three year plan.

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