Skip to Content
June 28, 2018 Blog 1 min read
The economy slowed in the first three months of the year, but history suggests that it be taken with a grain of salt.

 Q1 2018 GDP

Today’s update on GDP held little news, but largely cemented what was already known: the economy grew at a solid pace in the first quarter, although not as strongly as in recent quarters.

The third estimate for Q1 indicated growth of 2.0% flat – down from a previous estimate of 2.2%. But there’s more to those numbers.

Consumer spending growth slowed considerably to 0.9% after clocking in at 4.0% in Q4. Perhaps more notably, spending on goods decreased outright, with spending on durable goods falling by 2.1% for the quarter.

Beyond the slippage in consumer spending, the other bit of news of note was the upward revision in the GDP price deflator, from a previously reported 1.9% to 2.2% for the quarter. With that revision, that indicator of inflation has exceeded 2.0% for three consecutive quarters, providing further evidence of building price pressures.

The slowdown came on the heels of three consecutive quarters of growth near 3%, but it’s too soon to sound any alarm bells about a slowdown. For over two decades, reported first quarter GDP growth has lagged the duration of the year by an average of more than 1.0%. The slowdown in consumer spending in particular may raise an eyebrow, but the softer result should be viewed with a healthy dose of skepticism. Growth in the second quarter is largely believed to have regathered momentum, with expectations once again near or above 3.0%.

Consumer confidence remained near an 18-year high in June, and labor market indicators remained strong, helping to support a generally positive outlook for the consumer sector and future spending growth. Although higher than in the prior week, jobless claims remained near multi-decade lows last week at 227,000. With job openings at near-record highs and unemployment at multi-decade lows, optimistic consumers appear ready, willing, and able to do their part to keep the economy on track.

Past performance does not guarantee future results. All investments include risk and have the potential for loss as well as gain.

Data sources for peer group comparisons, returns, and standard statistical data are provided by the sources referenced and are based on data obtained from recognized statistical services or other sources believed to be reliable. However, some or all information has not been verified prior to the analysis, and we do not make any representations as to its accuracy or completeness. Any analysis non-factual in nature constitutes only current opinions, which are subject to change. Benchmarks or indices are included for information purposes only to reflect the current market environment; no index is a directly tradable investment. There may be instances when consultant opinions regarding any fundamental or quantitative analysis may not agree.

Plante Moran Financial Advisors (PMFA) publishes this update to convey general information about market conditions and not for the purpose of providing investment advice. Investment in any of the companies or sectors mentioned herein may not be appropriate for you. You should consult a representative from PMFA for investment advice regarding your own situation.