U.S. economy posts best Q1 in four years

The U.S. economy is still surging into 2019. With a 3.2 percent growth rate in growth domestic product (GDP) last quarter, the economy is having its best Q1 in four years and proving that it can shake any political unease or government shutdown.

Despite sentiments that last year’s economic success was short-term and had not yet responded to the trade policies of the Trump Administration, the economy is proving otherwise. With the number of exports climbing and imports plummeting, the U.S. was able to successfully spur domestic production – the overarching goal of President Trump’s tariff policy.

Another factor that contributed to the spike in GDP was inventory investment; firms stocked up their shelves in the first quarter, which helped to ramp up production. This factor could potentially slow in the second quarter due to the natural course of business cycles, but it will likely rise again later in the year. Economist Alan Maguire is bullish about the state of the economy looking forward.

“I think overall confidence is strong in the U.S. right now among consumers as well as among businesses,” Maguire said. “That confidence is predicated on the expectation of reasonable stable business conditions. They think that things will be kind of how they are now in a year or so from now — which is a positive trend line. People aren’t exuberant, but they know there’s good steady growth. It’s a real constructive kind of optimism — it’s not giddy optimism.”

On the other hand, consumer spending slowed by more than half the rate of the fourth quarter sliding from 2.5 to 1.2 percent. Because consumer spending comprises roughly two-thirds of economic activity, this looks like an apprehensive sign at first glance. However, Q4 consumer spending is always inflated due to holiday spending, so this fall shouldn’t be a credible cause for concern.

In fact, some economists also predict that consumer spending will rebound in Q2. Low unemployment, high wages, and strong consumer confidence are all signals of a booming second quarter for consumer spending. In fact, Maguire is optimistic about consumer spending and this 1.2 percent figure.

“That’s another interesting sign — we don’t have that false optimism or sugar-high that we had before, so everyone isn’t spending every dollar they have,” Maguire said. “They’re spending more, but they’re spending more gradually. As long as consumer spending is increasing, that’s a good sign.”

But underlying this growth, as well, is the improvement in worker productivity. U.S. workers’ efficiency grew by 3.6 percent year-over-year, allowing companies to reduce prices, increase wages, and/or re-invest in technology, which makes them even more efficient. This productivity is crucial to the economy’s success – especially in the long-run.

Notably, Arizona’s GDP also increased by four percent last year — the fourth fastest growth in the nation. In fact, State 48 outpaced states like California, Texas, and Florida last year.

“We saw a lot of optimism in the mid 2000s — 2005, 2006, 2007 — when you saw the bubble forming. Both nationally and in Arizona — it feels much more stable and solid growth in development and product,” Maguire concludes.

Arizona was recently recognized by Chief Executive Magazine as the 7th best state to do business, moving up two spots in the annual “Best & Worst States for Business” survey.

“With a booming economy, budget surplus, talented workforce, low regulation and tax environment, and unbeatable quality of life, it’s no wonder business leaders increasingly want to come to Arizona,” said Governor Ducey. “The word is out on Arizona. We are open for opportunity. And we will continue to implement smart policies that grow jobs and allow us to continue investing in the things that matter.”

Ben Norman

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