U.S. Outlook: Behind the Q1 GDP headlines, and what it means for Q2

Scott Anderson
Posted by Scott Anderson
Chief Economist

We were bracing for a soft Q1 GDP print this morning, primarily due to a sharp slowdown in real consumer spending in the first quarter.

Crowds of shoppers walking in a mall, focusing on their walking legs.We got the drop we forecast, as real consumer spending growth slumped to 1.1% from a 4.0% annualized growth rate in Q4.

For more on this, see highlights of my report below, followed by a link to the full U.S. Outlook, delivered on April 27.

Key observations:
  • The decline in consumer spending was driven by a 3.3% decline in durable goods spending, primarily motor vehicles.
  • Business equipment spending also came out on the weak side.
  • We expect the drop in real consumer spending growth in Q1 to be partially reversed in the second quarter as recharged savings, pent-up demand, and lower credit card balances entice consumers to spend more freely.
  • Our forecast for Q2 GDP growth improved to 3.0% from 2.6% prior to today’s release.

Read my full report.

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