US economy grew at strong 3.2% rate in Q1

WASHINGTON -- The US economy grew at an annual rate of 3.2 percent in the first quarter of 2019, data released Friday by the Department of Commerce showed.

That growth rate of the real gross domestic product (GDP) indicated an acceleration of economic expansion from the downwardly revised annual rate of 2.2 percent in the fourth quarter of 2018.

The pickup in pace, which is faster than what economists have expected, is mostly driven by strong exports and private inventory investment, according to the department's report.

Exports were up 3.7 percent in the quarter, while net exports, measured by exports subtracting imports, contributed 1.03 percentage points to the quarter's GDP growth.

Given the uncertainties in trade flows between the United States and its trading partners brought about by the ongoing frictions, the upturn in exports is believed to be incidental rather than a lasting driving force for the economy.

As for the inventory investment, another category that is largely viewed as volatile, nonfarm private inventories added 0.67 percentage points to growth in the three-month period. The department said the acceleration reflected an upturn in manufacturing inventories for durable and nondurable goods industries.

Growth in consumer spending, which accounts for more than two-thirds of U.S. economic output, decelerated to 1.2 percent, compared with a 2.5-percent rise in the final quarter of 2018.

Business investment, meanwhile, was stronger than in the fourth quarter, but rise in nonresidential fixed investment softened to an annual rate of 2.7 percent, down from 5.4 percent in the previous quarter.

The quarterly GDP report also showed that the price index for personal consumption expenditures (PCE) increased at a 0.6-percent rate in the first quarter, compared with 1.5 percent in the previous quarter.

Core prices, which exclude the volatile food and energy prices, rose at a 1.3-percent rate. As a measure of overall inflation, the PCE price index is an important reference for officials at the Federal Reserve when making policy decisions.

In addition, growth in residential investment, a proxy for housing construction, fell to 2.8 percent in the first quarter, marking the fifth drop in a row.

The first-quarter advance estimate released Friday is based on source data that are incomplete or subject to further revision by the source agency, the report said, adding that a second estimate based on more complete data will be released on May 30.