GDP Growth

2019 First Quarter GDP and How to Interpret it in Layman Terms

According to the Bureau of Economic Analysis the Real gross domestic product (GDP) increased at an annual rate of 3.2 percent in the first quarter of 2019 (table 1), according to the “advance” estimate released by the Bureau of Economic Analysis. In the fourth quarter of 2018, real GDP increased 2.2 percent.

The Bureau’s first-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency (see “Source Data for the Advance Estimate” on page 2). The “second” estimate for the first quarter, based on more complete data, will be released on May 30, 2019.

Now let’s get down to it:

  • The number is higher than the original estimate of 2.3%
  • Watch Item! The inflation remained contained. Is that good or bad or neither. What that means is that strong growth rate is not driving inflation to go up and that is a concern for policy makers. Think of it this way, if the demand for products are up why aren’t businesses raising their prices which would increase the inflation rate.
  • The first-quarter GDP figure was boosted by temporary factors such as a boost in inventories and a slowdown in imports. Once those wear off, many forecasters expect GDP growth to cool to around 2%.
  • Stocks ended up trading higher at the end of trading Friday driven by the strong GDP growth.

What remains to be seen is how do the numbers fair in the next quarter as there are fears of recession coming in 2020. What do you think of these numbers?

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