After the release of last week’s impressive GDP headline of 3.2%, some analysts noted that a deeper look beyond the headline number revealed that not all the innards were was as rosy as the headline. Harvard Professor Jason Furman noted that “The underlying trend of consumption and investment is weakening.” In fact, private-sector consumption and investment slowed to just a 1.3% annual rate in the first quarter, the slowest in nearly six years. Furthermore, consumer spending rose only 1.2% in the first quarter, after healthy 2.5% growth the previous quarter, and spending on durable goods plunged 5.3%, the worst since 2009. Professor Furman notes that the 3.2% GDP reading was deceptively boosted by several one-off factors—improvement in the trade balance, a large build-up in inventories and higher spending by state and local governments. The private-sector slowdown is illustrated by the following chart, from Haver Analytics.
| April 29, 2019