Gross Domestic Product Advance Estimate First Quarter 2018

Real gross domestic product increased at an annual rate of 2.3 percent in the first three months of 2018 according to the Bureau of Economic Analysis.  This advance estimate indicates a moderate deceleration occurred in the period as inflation-adjusted output grew 2.9 percent in the fourth quarter of 2017; meaning gross domestic product (GDP) slowed for the second consecutive period.

All major areas of the economy improved.  Nonresidential fixed investment (think business equipment and structures) led the tally higher, rising 6.1 percent.  Personal consumption was higher as well, but it decelerated to 1.1 percent from 4.0 percent to end last year; contracting outlays for durable items (i.e., wares expected to last longer than three years) kept consumers’ contribution from being more significant.  Government spending (both federal as well as state and local) also increased but did so at a slower rate of change, up just 1.2 percent versus 3.0 percent at the end of last year.  Finally, trade’s component improved as exports decelerated less than did imports. 

While all major components of the economy improved, only one of them accelerated in the period.  Private domestic investment increased 7.3 percent after gaining 4.7 percent a quarter earlier.  Outlays for nonresidential structures were the primary driver in this portion of output.

America’s economy is heading in the right direction.  First quarters have been challenging for GDP since the end of the last recession.  Many of the slowest quarters of the intervening years have been in the first three months.  Atlas believes the upward trend is the key takeaway, not the deceleration.  However, if the slowdown extends into the second quarter of this year, then more caution is warranted, but we will not get a look at that data until the end of July, so let’s enjoy what we have in the meantime.