What Props Up First-Quarter U.S. Growth May Be a Drag Later

  • The U.S. economy’s first quarter is looking a lot rosier than a few weeks ago, but the factors supporting that growth may be more ephemeral rather than a sign of sustained momentum.
  • That’s because rising inventories and a smaller-than-expected trade gap were among the main forces pushing up gross domestic product estimates for the first three months of 2019.
  • Thanks partly to those two volatile components, a Commerce Department report Friday is expected to show GDP expanded at a 2.3% annualized pace in the period -- up slightly from the fourth quarter and about in line with the 10-year average -- rather than the 1.5% seen in early March, according to Bloomberg’s surveys of economists.
  • “It’s a good news, bad news story,” said Richard Moody, chief economist at Regions Financial Corp. “If inventories are a big driver of growth in one quarter, then that sets you up for slower growth in subsequent quarters.”

(Source: Bloomberg)