GDP rises 3.1 percent showing solid growth

The U.S. economy grew at a solid rate of 3.1 percent in the first quarter of the year, but the healthy number concealed several emerging threats to global growth, including strains from the year-long U.S.-China trade war.

The Department of Labor released its third and final GDP reading on Wednesday morning, revealing that the gain in GDP was unchanged from one month ago during the three-month period from January to March. Upward revisions to non-residential fixed income, exports, state and local tax spending and residential fixed income were offset by downward revisions to consumer spending and inventory investment.

Despite the healthy figure, some analysts suggested the U.S. economy will still decelerate this year, evident in the reading of the second-quarter which ends this weekend.

“We believe that recent softness in manufacturing indices is beginning to reflect the fact that demand growth is starting to flag, leaving producers in an increasingly difficult position,” said Cailin Birch, global economist at The Economist Intelligence Unit.

Birch said she anticipates the economy to expand by just a little more than 1 percent quarter on quarter.


“We expect these strains to be reflected in the second quarter,” she said.

Earlier this week Federal Reserve Chair Jerome Powell, in a speech, indicated that while the U.S. economy remains on solid footing "the risks to this favorable baseline outlook appear to have grown." He also reminded investors that the Fed is independent despite ongoing criticisms from President Trump.

“Congress chose to insulate the Fed this way because it had seen the damage that often arises when policy bends to short-term political interests,” Powell said during a speech at the Council on Foreign Relations. “Central banks in major democracies around the world have similar independence.”