WASHINGTON • Economists expect US first-quarter (1Q) growth to decelerate less than previously thought even as they cut forecasts for the rest of the year, projecting a 2Q rebound will fade as the effects of tax cuts wane.
The median estimate for growth in the first three months of the year increased to 1.6% from 1.5% seen last month, according to an April 5-10 Bloomberg News survey.
At the same time, forecasts for the 2Q held at 2.6%, while those for the 3Q edged down to 2.2% and were also lower for the 4Q, at 2%.
The shift left full-year 2019 growth forecasts unchanged at 2.4% — followed by 1.9% in 2020 — indicating most economists remain sceptical that US President Donald Trump will enjoy a second straight year of around 3% expansion.
The projections also reinforce the US Federal Reserve’s patient stance on interest rates as policymakers gauge slowing global growth and subdued inflation.
The boost in 1Q estimates reflects forces such as slower imports and higher than expected inventory accumulation, which could weigh on growth this year. Mark Zandi, chief economist at Moody’s Analytics Inc, has bumped up his 1Q forecast to 2.5% from 1.1% and lowered his estimates for the 2Q, 3Q and 4Q compared to a March survey.
For the 1Q, “growth has been juiced up by a much bigger gain in inventories than we had estimated a month ago”, he said. “Inventories are becoming a problem, and we have businesses working off those inventories in the 2Q, 3Q and into the 4Q.
“Businesses were surprised at how strongly, quickly demand fell off coming into 2019,” Zandi said. “They just produced too much.”
The Commerce Department will release its 1Q GDP report on April 26. — Bloomberg