Associated Press
WASHINGTON — The U.S. economy began 2017 with a whimper — though not quite as weak a whimper as the government had first estimated.
The gross domestic product — the broadest gauge of the economy — expanded in the January-March quarter at a 1.2 percent annual rate, the government said Friday. That was better than its initial estimate of a 0.7 percent rate but far below President Donald Trump’s growth targets, which most economists consider unrealistic.
The government’s upgraded estimate of first-quarter growth reflected new-found strength in consumer spending, business investment and state and local government spending.
Many analysts have estimated that growth in the current April-June quarter is rebounding to an annual rate above 3 percent. They envision stronger consumer spending fueled by solid hiring, with unemployment at a decade low of 4.4 percent, and increased consumer spending. They note that growth in the first quarter was held down by some unusual temporary factors, including unseasonably warm weather, which limited spending on utilities.
Friday’s upgraded estimate of first-quarter growth “doesn’t alter the fact that it was another disappointing start to the year,” said Paul Ashworth, chief U.S. economist at Capital Economics. But Ashworth and other analysts said they still envision more robust expansion in the current quarter.
“Growth is bouncing back in the second quarter,” said Gus Faucher, chief economist at PNC. “Consumer spending continues to expand with job and wage gains, and business investment is picking up, especially for energy-related industries.”
After the expected rebound this spring, though, analysts generally foresee growth falling back to an annual rate of 2 percent to 2.5 percent in the second half of the year — the same modest pace that has prevailed for nearly all the eight years of this economic recovery, the slowest expansion in the post-World War II period.
During the campaign, Trump bemoaned the economy’s weak growth and blamed what he called the Obama administration’s failed policies. He had vowed that his program of tax cuts, deregulation and tougher enforcement of trade agreements would double growth to 4 percent or better.
The 2018 budget plan that the Trump administration proposed this week projects a lesser but still questionable rate of expansion: It assumes that a mix of sharp spending and tax cuts can both shrink the deficit and fuel growth of 3 percent a year, a pace it hasn’t reached on a sustained basis in more than two decades.
Many experts have dismissed the notion that the economy can achieve a consistent annual growth rate of at least 3 percent at a time of sluggish worker productivity, an aging workforce and slower spending by consumers — on top of Trump’s proposed spending cuts to education, research and social programs.
The economy grew 1.6 percent for all of last year, the poorest showing in five years. With Trump’s legislative program meeting resistance in Congress, forecasters have been paring their growth estimates for the second half of this year.
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