The Bureau of Economic Analysis released it preliminary estimate of first quarter gross domestic product (GDP) Thursday, and the 0.5% annual growth rate was even weaker than the 1.25% forecast of CUNA’s economists.
It was the weakest quarterly gain in two years. Consumption spending rose 1.9%--marginally higher than the 1.8% growth in the first quarter of last year. Consumer spending on services increased 2.7%, outpacing spending on goods, which rose 0.1%.
While private investment spending decreased by 3.5%, the housing component rose 14.8%--the fastest increase since the fourth quarter of 2012. This reflects recovery in the housing market which has picked up pace and has positive implications for credit union mortgage lending.
The residual effects of a strong dollar continue to show in the trade numbers. Exports fell 2.6% while imports rose 0.2%. “Since the dollar stopped appreciating in January and has declined by 4% during the first quarter, we expect better trade numbers ahead,” said CUNA Senior Economist Perc Pineda.
Despite weaker first quarter GDP numbers, CUNA’s economists still expect stronger growth for the rest of the year. The first quarter has been the weakest of the year for four of the last five years. The labor market remains healthy, and real disposable personal income increased 2.9%, exceeding the 2.3% increase in the fourth quarter last year. This should support higher household spending and credit union loan growth moving forward. “We expect the economy to grow at a 2.25% annual rate for the rest of the year,” Pineda said.