The U.S. expansion in the first quarter of 2019 was revised downward 0.1 percentage point to a still robust 3.1%, according to the U.S. Bureau of Economic Analysis (BEA) “second” estimate released Thursday (May 30). However, Arkansas’ GDP reading received another lower revision from 1.5% to 0.9% for 2018.
Entering 2019, the nation’s economy benefitted from an upturn in state and local government spending and a spike in private business investment and exports, but saw a slowdown in housing purchases and U.S. goods sold abroad, BEA data shows.
The stout first, or “advanced,” reading of 3.2% on May 4 was a full percentage point from the lukewarm growth of 2.2% in the fourth quarter of 2018. The BEA’s second estimate is based on more complete source data than was available for the advance forecast from a month ago.
The updated GDP report, which measures the value of the goods and services produced by the nation’s economy less the cost of the goods and services used up in production, adjusted for price changes, led U.S. Secretary of Commerce Wilbur Ross to again boast that President Donald Trump’s policies have “unleashed” the U.S. economy, beating Wall Street predictions of only a 2.3% expansion in the first three months of 2019.
“U.S. economic growth for Q1 again beat expectations, increasing by 3.1%. Under @RealDonaldTrump, great trade deals like #USMCA, #deregulation and the #TaxCutsAndJobsAct are restoring American economic leadership on the world stage,” Ross tweeted today.
ARKANSAS GDP GROWTH REVISED SIGNIFICANTLY
Earlier this month, the BEA reported that Arkansas saw weak real gross domestic product (GDP) of only 1.5% in the fourth quarter of 2018, well below the national standard of 2.2% and 34th among the 50 U.S. states. The Commerce Department economic research group also revised estimates for the previous four quarters, pushing down overall growth for Arkansas from the fourth quarter of 2017 through the three-month period ending Sept. 31, 2018.
The most notable revision was Arkansas’ second-quarter GDP growth of 4.4%, which ranked 10th in the nation. It was downgraded to GDP growth of only 1.7%, pushing Arkansas well below the national average of 2.1%. Likewise, the fourth quarter of 2017 and first quarter of 2018 were downgraded to GDP growth of 1.8% and 1%, respectively, compared to previous estimates of 2.7% and 2%, BEA data shows.
“As is often the case, data revisions that came out with the (GDP) report are important for putting the most recent data into context,” University of Arkansas at Little Rock economist Michael Pakko said. “For Arkansas, these revisions raised estimates of GDP growth in late 2016 and early 2017, but lowered growth estimates for more recent quarters.”
For the year, Arkansas saw GDP growth of only 0.9% in 2018, which pales in comparison to U.S. GDP growth in 2018 of 2.9%. Over the past five years, according to Pakko, Arkansas GDP growth has averaged 0.9% while the U.S. growth rate has averaged 2%.
ST. LOUIS FED: CHALLENGES REMAIN
Despite the Trump administration’s unbridled enthusiasm concerning the economy, St. Louis Federal Reserve economist Kevin Kliesen noted in a recent report that challenges remain despite the “stronger-than-expected” start to the year, which caused some forecasters to pencil in faster real GDP growth in 2019.
“Still, some key economic data have been mixed, and a few models are showing elevated recession probabilities over the next four quarters,” said Kliesen, the St. Louis Fed’s business economist and research officer for the expansive 8th District that includes Arkansas. “By contrast, labor market conditions, which are a usually reliable indicator of cyclical strength or weakness, continue to show scant evidence that firms are preparing for a sales slowdown.”
One “wild card” ahead for the U.S. economy, Kliesen said, is the ongoing trade dispute with China that has rattled financial markets in both countries and elevated measures of business uncertainty. “On balance, though, the sentiment in financial markets remains mostly bullish. A key reason is that the latest projections by the Federal Open Market Committee (FOMC) now show the likelihood of no further rate hikes in 2019,” said the highly-regarded economic forecaster.