U.S. economic growth accelerated in the first quarter, the government confirmed on Thursday, but the export and inventory boost to activity masked weakness in domestic demand, some of which appears to have prevailed in the current period.
Federal Reserve Chairman Jerome Powell last week acknowledged the temporary lift to economic growth from trade and inventories, which he described as “components that are not generally reliable indicators of ongoing momentum.”
The U.S. central bank last Wednesday signaled interest rate cuts as early as July, citing rising risks to the economy, especially from an escalation in the trade conflict between the United States and China, and low inflation.
“First-quarter GDP paints a misleading picture of the U.S. economy’s vigor at the start of the year, and second-quarter GDP will come as a timely reminder that the economy is now well past its inflection point,” said Lydia Boussour, a senior U.S. economist at Oxford Economics in New York.
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