Bureau of Economic Analysis second estimate of growth in real GDP for the first quarter of this year stands at a lackluster 1.8 percent, a marked deceleration from the 3.1 percent rate of growth in the previous quarter.

These factors were reflected in a sharp deceleration in the rate of growth of real final sales, which was revised down to only 0.6 percent in the second estimate. 

Deceleration in the rate of growth of personal consumption expenditure (up 2.2 percent compared to 4.1 percent in the previous quarter) and non-residential fixed investment (up 3.4 percent compared to 7.7 percent the previous quarter) also contributed to the slowing rate of economic growth in the first quarter.

Despite these recent negative developments, which have prompted some downward revisions to forecasts for the U.S. economy, we believe that a systematic economic expansion is underway. We view the various external shocks as transitory.

Expect GDP growth to strengthen in the second quarter, rising by 3.2 percent, with final sales anticipated to pick up considerably, more than compensating for a cutback in inventory investment. Both nonresidential construction and residential fixed investment may chip in a bit as well, although the government sector most likely will continue to exert a drag on economic growth.

– Courtesy of NAHB