Economic News

United States’ Q1 GDP Growth Exceeds Expectations

Following a relatively weak fourth quarter that brought down the United States’ 2018 average gross domestic product growth to just below 3%, the economy managed to to exceed expectations and roar back in the first quarter of 2019. According to CNBC, a poll of economists estimated the quarter’s GDP growth to be 2.5%. Instead the Bureau of Economic Analysis’ report released on Friday showed growth of 3.2% — marking the first time since 2015 that a year’s Q1 has surpassed 3% growth.

Upon the report’s arrival the S&P 500 and Nasdaq closed at new record highs. The former ended the day at 2,939.88 to top the previous high of 2,933.68 it set three days earlier while the latter rose to 8,146.40. Once again the Dow Jones Industrial Average failed to join the party, closing about 1.5% shy of its all-time point record.

Speaking of the stock market, there are now some that think we could be in a so-called “melt-up” situation. As Bloomberg explains, such an event is defined as “a rapidly accelerating rally driven purely by sentiment, with high participation, volumes, and volatility.” In other words, traders abandoned many of the technicals they’re taught for evaluating stock prices and, instead, choose to ride the wave of returns. Asked if he thought the current rally marked a melt-up situation, BlackRock CEO Larry Fink said it was a possibility, citing the fact that many funds that had been sidelined after last December’s sell-off had been making their way back to the markets as of late.

Looking to the political side of things, the continued GDP growth is certainly good news for President Trump as he continues to leverage the economy’s strength for his reelection campaign. Facing a record-sized field of Democratic candidates looking to take his job in 2020 (or 2021, technically) as well as fallout from the special council’s recently-released report, Trump has been talking up the economy in recent tweets and speeches. On Friday the President tweeted, “Real GDP for First Quarter grew 3.2% at an annual rate. This is far above expectations or projections. Importantly, inflation VERY LOW. MAKE AMERICA GREAT AGAIN!” Earlier in the week Trump also pined for the “old days” when “if you were President and you had a good economy, you were basically immune from criticism.”

Despite continued concerns about the U.S.’s trade relationship with China and now the possibility of a market “melt-up” at play, the 3.2% GDP growth seen in Q1 is a reassuring sign that the economy isn’t done expanding just yet. In fact the renewed optimism could serve to spur even more growth as investments rise. So can we see a repeat performance for Q2? We’ll have to wait and see.

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