Economic viewpoints

Q1 GDP Shows Underlying Economic Strength

U.S. economic growth in the first quarter came in at 1.6%, below the consensus forecast of 2.2%, but the underlying data paints a stronger picture than the topline number suggests.

Why it matters: Growth didn’t meet expectations because there was a surge in imports, and businesses reduced their inventories. Neither of these has as much to do with the underlying fundamentals of the economy as spending and investment.

  • If you strip out the trade and inventory numbers, the economy grew by more than 2.8%.
  •  Consumer spending was up 2.5% and business investment rose 5.3%.

Big picture: More should be done to improve the business environment and drive economic growth.