HOUSTON (FOX 26) - This week’s panel: Wayne Dolcefino – media consultant, Laura Moser – former Democratic congressional candidate, Bob Price – Associate Editor of Breitbart Texas, Carmen Roe – Houston Attorney, Kathleen McKinley – conservative blogger, Antonio Diaz- writer, educator and radio host, join Greg Groogan to discuss the upswing in the economy and President Trump.
WASHINGTON (AP) - The U.S. economy grew at a solid 3.2% annual rate in the first three months of the year, a far better outcome than expected, overcoming a host of headwinds including global weakness, rising trade tensions and a partial government shutdown.
The advance in the gross domestic product, the broadest measure of economic health, marks an acceleration from a 2.2% gain in the previous October-December period, the Commerce Department reported Friday. However, about half the gain reflected two factors not expected to last - a big jump in stockpiling by businesses and a sharp contraction in the trade deficit.
Still, the GDP gain surpassed the 3% bar set by President Donald Trump as evidence his economic program is working. Trump is counting on a strong economy as he campaigns for re-election.
In a tweet, Trump called the 3.2% growth "far above expectations." Speaking to reporters before leaving Washington for a speech to the National Rifle Association, Trump termed the GDP figure an "incredible number" and said, "Our economy is doing great. Number One in the world."
It was the strongest first quarter growth rate since 2015. In recent years, GDP has been exceptionally weak in the first quarter. There had been fears growth could dip below 1% this year due to a variety of adverse factors such as the December stock market nosedive, rising weakness in key economies overseas, the U.S. trade war with China and a 35-day partial government shutdown that ended in January.
But the economy shrugged off those concerns, helped by an announcement in early January from the Federal Reserve that after raising rates four times last year, it was declaring a pause on further rate hikes. That spurred a stock market rebound by easing concerns that the central bank might overdo its credit tightening and send the country into a recession.
In the first quarter, inventory rebuilding added 0.7 percentage point to growth, while a falling trade deficit boosted growth by a full percentage point. Analysts think both of those factors will reverse in the current quarter. Analysts at Macroeconomic Advisers said they expect GDP will slow to a 1.8% rate in the second quarter.
"The drivers of growth in the first quarter are unlikely to persist," said Gus Faucher, chief economist at PNC.
But Larry Kudlow, head of the president's National Economic Council, said the administration is sticking with its estimate for growth above 3% this year, believing that low unemployment and solid wage gains will give a boost to consumer spending, which slowed in the first quarter.
Kudlow predicted that the income growth will lead to a rebound in car sales and also help lift housing, which has been struggling over the past year.
"I think the prosperity cycle is intact," Kudlow said in a CNBC interview. "I think the Trump policies are working to rebuild America and people are getting happier and happier."
Consumer spending, which accounts for 70% of economic activity, slowed to growth at a rate of just 1.2% in the first quarter. In particular, spending on durable goods fell at a rate of 5.3%, the biggest decline in a decade, led by a sharp drop in light truck sales.
Government spending was up 2.4% as a big 3.9% gain in state and local spending, reflecting increases in highway construction, offset a flat performance for the federal government. The government estimated that the 35-day partial federal shutdown trimmed 0.3 percentage point from growth in the first quarter after trimming fourth quarter growth by 0.1 percentage point.
For the year, economists believe GDP will expand 2.4%, down from last year's 2.9% gain, as the boost from the 2017 tax cuts and increased government spending over the past two years start to fade.
The consensus view of private forecasters is well below expectations of the Trump administration which contends that its economic policies have broken a decade-long period when GDP gains averaged 2.2% annually. The administration is predicting growth will top 3% in coming years.
There are factors that could help lift growth in coming quarters. The global economy appears on better footing, given improvements in such major economies as China, and a trade war between the world's two largest economies that appears closer to being resolved than it did at the start of the year.
Mark Zandi, chief economist at Moody's Analytics, said he expects growth for this year to be around 2.2%, close to the average for the past 10 years.
"We got a temporary boost to growth last year because of the tax cuts but that money has been spent so we are back to the kind of growth we have had," Zandi said. "I think we are back to the 2% world we have been in since the recession ended."
The current recovery from the Great Recession of 2007-2009 is currently the second longest in history and will become the longest if it lasts past June.
But it has also been the slowest in the post-World War II period, a development economists attribute to slower growth in the labor force and weak gains in productivity.
WASHINGTON (AP) - The worries that hung ominously over the U.S. economy early this year appear to have lifted. And that sunnier picture has helped bolster confidence in the stock market - driving the benchmark S&P 500 index to another record high Friday.
The latest dose of encouragement came in a report Friday that the U.S. economy grew much faster than expected in the January-March quarter, suggesting that the nearly decade-long expansion still has a ways to go.
Other recent signs have fed a growing view among many analysts that the economy faces little risk of slipping into a recession anytime soon as some had feared when the year began. Retail sales jumped in March. And with hiring solid and wages rising at a decent pace, consumer spending will likely strengthen in the coming months.
In Friday's report, the government said the economy grew at a 3.2% annual rate in the first quarter. That's much better than the 1% or below rate that was forecast in the early weeks of 2019.
Though the economy is widely expected to slow in the current quarter to a roughly 2% rate or less, such a pace would still produce annual growth for the first half of the year of roughly 2.5%. That would be a solid gain. And it would be in line with the modest but steady growth that has prevailed for most of the expansion.
It's also a far brighter scenario than the one envisioned late last year and early this year. A 35-day partial shutdown of the government remained in effect through most of January. Global growth was sputtering in the midst of the U.S.-China trade war. Stocks plummeted in December as the Federal Reserve raised short-term interest rates for the eighth time in nine quarters and signaled that further tightening was likely. Mortgage rates rose, discouraging many would-be home buyers.
American households also cut back: Retailers' sales were weak in January and February, adding to the bleak outlook.
Share prices, though, began to rebound in January, after the Fed signaled that it had put any further rate increases on hold, likely for the rest of the year. That emboldened investors, who have become increasingly confident that the economy will avoid the worst-case scenario of a recession.
After falling nearly 20% at the end of last year, the S&P 500 has now recouped all its losses since late September. Though few Americans have substantial stock holdings, rising share prices can help boost consumer confidence.
Economists cautioned that first quarter growth was driven mostly by several temporary factors that should reverse themselves in coming months. Retailers and other companies, for example, sharply increased the stockpiles of goods in their warehouses and on store shelves. Those additions added nearly 0.7 percentage point to the quarter's growth figure. And the trade deficit narrowed sharply, adding an additional percentage point.
"We know this is not going to be sustainable," said Joe Brusuelas, chief economist at RSM, a tax consulting firm.
Businesses won't likely order as many new goods as they wait for consumer spending to reduce their stockpiles. That will probably restrain growth. And the improvement in the trade deficit last quarter occurred partly because imports fell sharply after many companies ramped up their buying from China last year in advance of potential tariff increases the Trump administration had scheduled for Jan. 1.
The White House ended up delaying those tariffs. As imports return to normal, the trade deficit will likely widen again.
Exports also rose in the January-March period, with China stepping up its purchases of U.S. goods, which some economists attributed to a temporary goodwill gesture by Beijing amid high-stakes trade talks between the two countries. Those negotiations are ongoing.
State and local government spending also rose last quarter, mostly to build more highways, which added 0.4 percentage point to growth and may also prove short-lived.
"Taking out the over-sized boosts from net trade, inventories and highways investment, which will all be reversed in the coming quarters, growth was only around 1%," said Paul Ashworth, an economist at Capital Economics. "Under those circumstances, we continue to expect that GDP growth will slow this year."
Larry Kudlow, head of President Donald Trump's National Economic Council, said the administration is sticking by its estimate that growth will top 3% for all of 2019. He argued that low unemployment and solid wage gains will lift consumer spending, thereby boosting auto and home sales.
"I think the prosperity cycle is intact," Kudlow told CNBC. "I think the Trump policies are working to rebuild America."
Whether the stock market can continue to march ahead - without additional evidence of corporate or economic strength - is far from clear.
"It's important to note investors already knew the U.S. economy was the strongest in the world," said Alec Young, managing director of global markets research at FTSE Russell.
Companies are in the midst of reporting how much profit they made in the first three months of 2019, and investors aren't expecting much. Analysts are forecasting the first drop in earnings for S&P 500 companies since the spring 2016.
But many companies have so far reported results that were better than Wall Street expected. That's crucial because stock prices tend to track profit growth over the long term.