GDP Growth Remains Trapped in the Slow Lane

Comment on Q1 GDP by Brian Schaitkin, Senior Economist, The Conference Board

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Apr 28, 2016, 09:29 ET

NEW YORK, April 28, 2016 /PRNewswire/ -- First quarter GDP figures showed continued slow growth as the U.S. Bureau of Economic Analysis reported a 0.5 percent annualized increase in Gross Domestic Product. This slow performance came after the economy expanded at only a 1.4 percent annual rate in the fourth quarter of last year. As expected, slow growth last quarter was driven by weaker consumption, a decline in business investment for the second consecutive quarter, a widening trade deficit due to still sluggish exports, and a large runoff of bloated inventory build from last year.

Still, these results understate the overall health of the economy. The labor market remains strong with unemployment remaining low and more workers returning to the labor force. Since the end of the Great Recession, even on a seasonally adjusted basis, first quarter GDP growth figures have shown a consistent pattern of being weaker than those for the rest of the year, which suggests that a small rise is in store in 2016. Most probably, employment and income growth will be offset by a still slow global economy and weak investment conditions as profit margins face further pressure, leading to a modest rebound of about 2+ percent trend growth.

SOURCE The Conference Board