In Q1 2018, Economic Growth Significantly Slowed Due To Poor Consumer Spending

Mike Mozart/CC BY 2.0/Flickr

First quarter consumer spending in the U.S. slowed to a pace not seen since 2013.

U.S. economic growth in the first quarter of 2018 experienced a significant slowdown, primarily due to a sharp decline in consumer spending.

According to Reuters, consumer spending – which comprises more than two-thirds of the U.S. economic activity – slowed to pace not seen since 2013, dropping to a sluggish rate of just 1.1 percent.

Consumer spending in the last quarter was undercut by a decline in purchases of motor vehicles, clothing and footwear as well as a slowdown in food and beverages outlays. This likely reflects delayed tax refunds.

Another factor was business spending, which also saw a sharp decline:

Business spending on equipment slowed to a 4.7 percent rate in the January-March quarter after double-digit growth in the second half of 2017. The cooling in equipment investment partly reflects a fading boost from a recovery in commodity prices.

Economists expect a marginal impact on business spending on equipment from rising interest rates and more expensive raw materials.

Despite a slow start to the year, economists project accelerated growth in the second quarter as the economic stimuli from last year’s tax cuts are felt more fully across both consumer and business realms, along with increases in government spending.

Comments