CUSTOMER SPENDING BOOSTS U.S. ECONOMIC GROWTH BY 2.1%

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Robust customer spending has provided U.S. a boost, which causes increase in GDP by 2.1%. The growth was partially offbeat by the massive profits in imports in 2 years and slowed increase than the previous fourth quarter.

Commerce Department on its third GDP estimate on Thursday said that it has increased at a 2.1 % annual rate instead of the 1.9 % pace, which was reported previously.

The signs of economic activity slowing down were shown in theĀ first quarter with spending of consumer and construction weakened and trade deficit widened in January.

In the third quarter, the economy grew at 3.5% and only 1.6 percent in the fourth-quarter in 2016 despite of the upward revision. Since, 2011, it was the worst performance even after growth rate of 2.6% in 2015.

“Some of this softness is due to seasonal adjustment issues that will reverse later in the year,” said Gus Faucher, deputy chief economist at PNC Financial in Pittsburgh. “Consumer spending will lead growth thanks to higher incomes from more jobs and rising wages.”

Labor market has nearly full employment and with this data likely understates the health of the economy. Because of the wrong calculation by government GDP also tends to be weaker in the first quarter, which they are trying to resolve.

As per The Atlanta Federal Reserve forecasting, the GDP may rise at 1.0 % in the first quarter.

Well, moderate growth rate is necessary to reduce unemployment rate and it is a challenge to Trump’s goal of growing the annual rate to 4 %. Economists say Trump is facing difficulties in implementing his pro-growth agenda after unsuccessful attempt by Republicans to revoke 2010 healthcare law by Obama’s administration.

“The primary question is whether the next few years will resemble the last several years with growth of around 2 percent or whether better days lie ahead,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors in Kalamazoo, Michigan.

Dollar was a bit stronger against other currencies, while U.S. Treasuries prices fell. And, in the fourth quarter growth in consumer spending was revised up to a 3.5 percent rate.

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Sean Raymond

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