The US economy expanded at a slower rate in the first quarter than originally estimated, the Commerce Department reported on Thursday, partly because of a slight decrease in the pace of consumer spending.
However, the status of the recovery still hinges on the prospects for job growth, analysts said.
The revised measure of the overall economy grew at an inflation-adjusted annual rate of 3 percent in the first quarter, down from the earlier estimate of 3.2 percent, the department said. Economists had forecast growth of 3.5 percent.
“The economy is still showing above-trend growth in the first quarter, and we think the economy is continuing to grow,” said Michael Feroli, US economist for JP Morgan Economics.
The 3 percent growth follows 5.6 percent in the fourth quarter of last year and 2.2 percent in the third.
One contributing factor to the revision was consumer spending, which was lowered to 3.5 percent, from 3.6 percent. Other factors in the revision included a decline in the purchases of business equipment and software and a sharp increase in imports, which helped widen the trade deficit. Spending on durable goods, like cars, grew 12.2 percent in the first quarter, compared with 0.4 percent in the previous three months.
With more than 70 percent of the economy composed of consumer spending, economists are pinning their hopes for a sustainable economic recovery on robust purchasing by households, much of which depends on consumer sentiment and job creation.
Joshua Shapiro, chief US economist for MFR, an economics consultancy, said that the latest GDP figures confirmed his view that the economy was growing at a moderate pace, albeit aided by government stimulus. Shapiro said he expected overall annualized growth of between 2.5 percent and 3 percent for the rest of the year.
The biggest debate, he said, is over the path of the recovery of the labor market and how it helps the ability of consumers to promote growth.
“An enormous amount hinges on the rate of job growth that we are going to see on a sustained basis,” he said.
The economy added 290,000 jobs last month — the largest gain in four years — across a broad swath of industries.
Still, the Labor Department said yesterday that initial jobless claims fell slightly to 460,000 in the week of May 22, down by 14,000. While the weekly level exceeded analysts’ expectations, total jobless claims still inspired a sober outlook.
“We continue to believe that an imminent and sustained burst of hiring sufficient to meaningfully impact the unemployment rate remains elusive,” Dan Greenhaus, the chief economic strategist for Miller Tabak & Co, wrote in a research note.
The latest job figures have been inflated by the hiring of temporary workers for the census, and Shapiro said those workers would continue to add to payrolls in the next few months.
The first-quarter GDP rate also showed downward revisions of government spending. Federal government spending grew at an annualized rate of 1.2 percent in the first quarter, down from the original estimate of 1.4 percent. Local and state governments continued to cut spending for the third consecutive quarter.
Greenhaus said he believed any additional federal stimulus might be directed to state and local governments.
Feroli also said that Thursday’s report revised labor income in the fourth quarter to US$7.74 trillion, from about US$7.77 trillion.
“It tells you on balance that labor is now getting a smaller share of the pie than we had previously thought,” he said.
Employees’ income rose in the first quarter of this year to US$7.80 trillion, the government said.
MORE VISITORS: The Tourism Administration said that it is seeing positive prospects in its efforts to expand the tourism market in North America and Europe Taiwan has been ranked as the cheapest place in the world to travel to this year, based on a list recommended by NerdWallet. The San Francisco-based personal finance company said that Taiwan topped the list of 16 nations it chose for budget travelers because US tourists do not need visas and travelers can easily have a good meal for less than US$10. A bus ride in Taipei costs just under US$0.50, while subway rides start at US$0.60, the firm said, adding that public transportation in Taiwan is easy to navigate. The firm also called Taiwan a “food lover’s paradise,” citing inexpensive breakfast stalls
TRADE: A mandatory declaration of origin for manufactured goods bound for the US is to take effect on May 7 to block China from exploiting Taiwan’s trade channels All products manufactured in Taiwan and exported to the US must include a signed declaration of origin starting on May 7, the Bureau of Foreign Trade announced yesterday. US President Donald Trump on April 2 imposed a 32 percent tariff on imports from Taiwan, but one week later announced a 90-day pause on its implementation. However, a universal 10 percent tariff was immediately applied to most imports from around the world. On April 12, the Trump administration further exempted computers, smartphones and semiconductors from the new tariffs. In response, President William Lai’s (賴清德) administration has introduced a series of countermeasures to support affected
CROSS-STRAIT: The vast majority of Taiwanese support maintaining the ‘status quo,’ while concern is rising about Beijing’s influence operations More than eight out of 10 Taiwanese reject Beijing’s “one country, two systems” framework for cross-strait relations, according to a survey released by the Mainland Affairs Council (MAC) on Thursday. The MAC’s latest quarterly survey found that 84.4 percent of respondents opposed Beijing’s “one country, two systems” formula for handling cross-strait relations — a figure consistent with past polling. Over the past three years, opposition to the framework has remained high, ranging from a low of 83.6 percent in April 2023 to a peak of 89.6 percent in April last year. In the most recent poll, 82.5 percent also rejected China’s
PLUGGING HOLES: The amendments would bring the legislation in line with systems found in other countries such as Japan and the US, Legislator Chen Kuan-ting said Democratic Progressive Party (DPP) Legislator Chen Kuan-ting (陳冠廷) has proposed amending national security legislation amid a spate of espionage cases. Potential gaps in security vetting procedures for personnel with access to sensitive information prompted him to propose the amendments, which would introduce changes to Article 14 of the Classified National Security Information Protection Act (國家機密保護法), Chen said yesterday. The proposal, which aims to enhance interagency vetting procedures and reduce the risk of classified information leaks, would establish a comprehensive security clearance system in Taiwan, he said. The amendment would require character and loyalty checks for civil servants and intelligence personnel prior to
RSS