BLS: U.S. GDP Slows to 2.0 Percent in First Quarter

The growth of U.S. gross domestic product slowed in first-quarter 2018, but on a trailing 12-month basis has improved for the last seven quarters. The third estimate of U.S. GDP growth in the first quarter was 2.00 percent, down from 2.87 percent in Q4 2017, according to the June 28 report by the Bureau of Labor Statistics.

Christine Lagarde, Managing Director of the International Monetary Fund, made the following comments on June 14: “The context of this year’s consultation is a U.S. economy that is doing even better than last year. Growth is stronger, unemployment is near the lowest it has been since the 1960s, inflation is contained, and consumer and business confidence are high. Within the next few years, the U.S. economy is expected to enter its longest expansion in recorded history. The Tax Cuts and Jobs Act and the approved increase in spending are providing a significant boost to the economy. We forecast growth of close to 3 percent this year, but falling from that level over the medium-term. In my discussions with Secretary Mnuchin, he was clear that he regards our medium-term outlook as too pessimistic. Despite this good news and a bright near-term outlook, at a longer horizon the U.S. economy faces several risks. First, the planned expansion in the federal deficit at this stage of the cycle could trigger a faster-than-expected rise in inflation. That would be accompanied by a more rapid rise in interest rates that could increase market volatility both in the U.S. and abroad. We are already starting to see symptoms of such negative effects in some emerging market countries, and this might not be the end of it. An important role of the IMF is to warn against these risks and cross-border effects. Second, the fiscal boost is likely to translate into faster import growth and a larger trade and current account deficit in the U.S. This will be matched by growing surpluses in other systemic economies. It may also lead to a stronger U.S. dollar. All of this could lead to a growth in global imbalances, an issue that we at the Fund have long been concerned about.”