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U.S. Economic Growth Slows: It Should Accelerate Next Quarter and Come In At About 2% In 2017

ArmchairPolitiicianEconomy, April 30, 2017, by Brad Peery, bradpeery007@gmail.com, www.ArmchairPolitician.US

The University of Michigan’s consumer sentiment measure is at the highest level in over a decade. The major stock market indexes are up over 10% since President Trump was elected, and after a brief decline recently, have returned to near record levels. Such improvements did not translate into economic growth in the first quarter of 2017. Growth forecasts had declined from 2.3% to 1.4%, but still missed the mark, with the quarter coming in at a 0.7% increase. Job growth forecasts have also declined, going from 187,000 a month to 169,000 per month for the rest of 2017 according to the Wall Street Survey of Economists.

Interesting results from the first quarter are: Consumer spending was very weak and only contributed 0.23% of the 0.7% increase; Business investment was strong, up 10.4%, and contributing 1.62% to the increase; And, inventories declined sharply, causing a 0.93% decline in the overall results. But for the inventory decline, the quarter would have shown a 1.85% increase.

Projections are that second quarter growth will come in at about a 3-4%, with the second half of 2017 coming in at about a 2% growth rate.

The Federal Reserve is raising interest rates, and is hoping that the inflation rate will stay at about 2%. The Producer Price Index (PPI) is a measure of manufacturing costs. For the 12 months ended in March, for final demand less foods, energy, and trade services PPI climbed 1.7 percent. The Consumer Price index rose 2.4 percent before seasonal adjustment. Higher energy prices caused the all items index to be higher than the index excluding food and energy. The Consumer Price Index (CPI) for all items less food and energy rose 2.0 percent over the last 12 months, the smallest 12-month increase since November 2015.

ArmchairPolitician.US Opinion: If the economy grows a 2.0% rate this year, and inflation comes in at about 2%, that should be the baseline for measuring how the Trump tax cuts, infrastructure spending, and job growth stimulus of the Trump policies affect the economy in 2018 and beyond.

See: ArmchairPolitician.US, March 2, 2017, Brad Peery
Trump Believes We Can We Achieve 3% Economic Growth. What are the Realities?

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