WASHINGTON — The U.S.
economy grew at a healthy 3.1% rate in the first three months of
this year, but signs are mounting that growth has slowed sharply in
the current quarter amid slower global growth and a
confidence-shaking trade battle between the United States and China.
The gain in the gross domestic product, the broadest measure of
economic health, was unchanged from an estimate made a month ago,
the Commerce Department reported Thursday. However, the components
of growth shifted slightly with stronger business investment and
consumer spending slowing more than previously estimated.
Economists believe growth has slowed sharply in the current
April-June quarter to around 2%. They expect similar gains for the
rest of the year, a forecast that runs counter to the Trump
administration’s expectations for strong growth above 3%.
The 3.1% growth in the first quarter marked a rebound from a 2.2%
growth rate in the fourth quarter of last year. But it was slower
than a sizzling increase of 4.2% in the second quarter and a solid
increase of 3.4% in the third quarter last year. For the entire
year, GDP grew 3.9%, the best annual gain since 2015.
Last year’s strength was powered by the implementation of a $1.5
trillion tax cut, President Donald Trump’s signature domestic
achievement, and billions of dollars in increased government
spending on the military and domestic programs Congress approved in
However, the impact of the tax cuts and the higher government
spending are expected to fade this year, leaving the economy growing
very close to the 2.2% average seen over the 10 years of the current
expansion, which will become the longest in U.S. history next month.
Economists at Capital Economics are forecasting that growth will
slow to 2.3% this year and even further to 1.2% in 2020 before
rebounding a bit to 2% growth in 2021.
Paul Ashworth, the firm’s chief U.S. economist, said that the
slowdown from the fading of the tax cuts and increased government
spending was being ‘‘exacerbated by a dramatic slowdown in other
parts of the global economy,’’ in particular Europe and Japan.
Trump’s ‘‘trade war with China is also sapping confidence,’’
The Trump administration disputes forecasts of a U.S. slowdown,
believing that its economic policies will lift growth to levels of
3% or better over the next six years.
Trump, who is counting on a strong economy as he campaigns for
re-election next year, has pushed the Federal Reserve to immediately
start cutting interest rates to undo what he sees as the damage from
four unnecessary Fed rate hikes last year.
At its meeting last week, the Fed did signal that it was prepared to
cut rates if needed to protect the economy from a growing trade
dispute between the United States and China.
Trump is scheduled to meet Saturday with Chinese President Xi
Jinping at a Group of 20 major nations summit in Japan to see if a
way can be found to restart trade negotiations between the world’s
two biggest economies.