On the Economy: The Latest GDP Update, the Labor Market, and Consumer Confidence

By at 31 May, 2019, 2:11 pm

by Raymond J. Keating-

First quarter GDP growth was updated by the U.S. Bureau of Economic Analysis on May 30th, and that came two days after the latest take on consumer confidence from the Conference Board.

Real GDP growth in the first quarter of 2019 was downgraded slightly from an initial estimate of  3.2 percent to 3.1 percent. The key positives in the first quarter came from investment in intellectual property products, something of a bounce back in exports compared to the previous two quarters, and the change in private inventories (which is a transitory measure from month-to-month).

The areas of question included a slowdown in fixed nonresidential (or business) investment, and a notable slowdown in the growth in personal consumption expenditures.

That last point regarding the consumer was further backed up by the recent poor retail sales report. This is all rather surprising given the strength of the labor market.

Indeed, one can make the case that the labor market is the strongest part of the current economy. And a positive labor market tends to feed into strong consumption.

And in fact, the Conference Board’s index showed that consumer confidence moved up, beat market expectations, and returned to levels registered this past fall, when the measure hovered near 18-year highs. The results here, again, are linked to the strong labor market.

Lynn Franco, Senior Director of Economic Indicators at The Conference Board, hit on the employment factor:

“The increase in the Present Situation Index was driven primarily by employment gains. Expectations regarding the short-term outlook for business conditions and employment improved, but consumers’ sentiment regarding their income prospects was mixed.” Looking ahead, Franco added: “Consumers expect the economy to continue growing at a solid pace in the short-term, and despite weak retail sales in April, these high levels of confidence suggest no significant pullback in consumer spending in the months ahead.”

Let’s hope that we see more than just an absence of a pullback, but instead, experience a reacceleration in business investment and consumer expenditures.


Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.


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