The US economy surprised analysts on Friday, blowing away estimates of around 2% growth to expand 3.2% in the first quarter. The Bureau of Economic Analysis number follows a print of 2.2% in the previous quarter.
A closer look at what accounted for the growth shows that business investment and consumer spending continue their downward trajectory. Exports saw a dramatic recovery, accounting for more than 1% of the 3.2% increase.
Consumer spending saw its third-straight quarter of slower growth, rising 1.2%, while nonresidential business investment rose at a pace of 2.7%, versus an average of 6% since US President Donald Trump took office. It was the second-slowest quarterly pace of growth for investment during that period.
Analysts have noted that, while uncertain trade policy still weighs on investment decisions, the benefits of the tax cut that underpinned strong economic growth last year have largely worn off.
Nonetheless, Trump administration officials were quick to tout what economic advisor Larry Kudlow called a “blowout number,” dismissing a consensus view among economists that underlying data showed a continued slowdown.
“I’ll just say that President Trump’s policies are rebuilding the economy, and actually the prosperity cycle we’re in is gaining momentum not losing it,” Kudlow said in an interview with CNBC.
He added that he sees the GDP estimate giving the Trump administration leverage in ongoing trade negotiations with China, which will continue in Washington next week.
“We’ve made a lot of progress but the deal’s not done … I’m cautiously optimistic about the outcome for a deal,” Kudlow said. But he added: “China’s economy is slumping and has been for some time. The US economy … is in this prosperity cycle with no end in sight. So we believe that does give us some leverage, if you will.”
“They need a good deal even more than we need a good deal, but we would like a deal that works for both countries and increases economic growth for both countries,” he said.