Though the economy in America remains quite resilient, the numbers in the first quarter of this year have been the lowest in the last three years. Analysts suggest, of course, this is largely a result of consumers slowing their spending; results which fell short of President Donald Trump’s ambitious new growth targets, also underscoring the vast challenges this administration will face in terms of accelerating economic expansion.
More specifically, the United States gross domestic product—that is, the total output of goods and services originating in the US—grew by only 0.7 percent in the first quarter of this year. That is following the much larger gain of 2.1 percent in the fourth quarter of last year, according to the United States Department of Commerce. And, looking closely at the numbers, it is easy to see that reduced consumer spending is largely responsible, with a seasonally adjusted annual rate of 0.3 percent, down from the 3.5 percent growth rate at the end of last year.
This is the poorest quarterly result in at least seven years.
Now, there may be more to this story than we realize. For example, Stephanie Pomboy says that “Consumers aren’t spending out of desire but out of obligation.” Pomboy is the founder of New York-based independent economics consulting firm, MacroMavens, and she goes on to say, “And I believe that since the recession and the bursting of the housing bubble, the middle class wants to save. They don’t want to get back into the position they were in after 2008.”
Perhaps more importantly, the tax cuts this administration is now proposing are not really going to reverse the current trend.
BMO Capital Markets senior economist Sal Guatieri comments, “Still, the report will mark a rough start to the administration’s high hopes of achieving 3 percent or better growth, not the kind of news it was looking for to cap its first 100 days in office.”
In addition, US Commerce Secretary Wilbur Ross—who happens to be one of the Trump administration’s top economic policymakers—notes that this weak first quarter shows a definite need for the new policies the President is offering.
Ross says, “We need the president’s tax plan, regulatory relief, trade negotiations and the unleashing of (the) American energy sector to overcome the dismal economy inherited by the Trump administration,” adding that strong business and consumer sentiment “must be released from the regulatory and tax shackles constraining economic growth.”