First Quarter 2018:
Now, it’s Trump’s economy



The US economy grew 2.86% year-on-year in the first quarter of 2018, three tenths of a point faster than in the previous season. It’s the seventh straight increase in the pace of growth, dating back to Q-2 2016.

Private consumption, which accounts for more than two-thirds of all economic transactions in the economy, slowed slightly, from 2.85% in Q-4 2017 to 2.63% in the latest period. Demand for services (44.8% of GDP) was up a sluggish 2% over January-March 2017 while goods purchases by households (23.6% of the economy) rose 3.6%.

Capital investment (a 16.7% slice of the total) rose a healthy 4.9% on the strength of non-residential construction. Government spending (18.1% of GDP) rose 1.2% after falling an average of 0.9% per quarter over the past seven years. Naturally, federal spending (+2%) and particularly defense (+3.6%) drove ahead. The GOPers are back in charge, so what do you expect?

Exports (12.9%) were up 3.1% and imports (18.1%) by 3.4%. As a result, domestic demand – the measure that looks at exports and something to be taken away from the economy and imports as a contribution – rose 3.1%, the best pace in nine quarters.

When the Fed thinks about adjusting interest rates, it looks at the change in prices households pay. By that measure, the private consumption deflator, inflation was 1.8% in the first three months of the year, the fastest pace in six years. That’s still below the target 2% minimum, but it is encouraging nonetheless.