NEW YORK: The US economy slowed more than previously estimated in the first quarter amid the weakest consumer spending in nearly five years, but growth appears to have since regained momentum on the back of a robust labor market and tax cuts.
Gross domestic product increased at a 2 per cent annual rate in the January-March period, the US Commerce Department said on Thursday in its third estimate of first-quarter GDP, instead of the 2.2 per cent pace it reported last month.
The economy grew at a 2.9 per cent rate in the fourth quarter. The downgrade to first-quarter growth reflected weaker consumer spending and a smaller inventory accumulation than the government had estimated last month.
$1.5 trillion income tax cut package, which came into effect in January, is seen spurring faster economic growth in the second quarter, putting annual GDP growth on track to achieve the Trump administration’s 3 per cent target.
Economists, however, caution that the administration’s “America First” policies, which have heightened fears of trade wars, are casting a pall over the economy’s prospects.
The United States is engaged in tit-for-tat trade tariffs with its major trade partners, including China, Canada, Mexico and the European Union. Analysts fear the tariffs could disrupt supply chains, undercut business investment and potentially wipe out the fiscal stimulus.
Growth estimates for the second quarter are as high as a 5.3 per cent rate.