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Economy enduring fits and starts in the first months of 2019

By Donald Lambro

The U.S. economy has been slowing down since last year, growing at a minuscule 2.2 percent in the fourth quarter of 2018.

That number represents the gross domestic product, the economy’s broadest measurement of its growth by the U.S. Department of Commerce.

The sharp decline in the last three months of 2018 was in part due to “softer consumer spending and a weaker climate for business investment that’s likely to depress growth in the first quarter as well,” according to the Market Watch website.

The rest of the economy is not doing so hot elsewhere this year, either. Home construction plunged 8.7 percent in February, as groundbreakings for single-family homes declined to their lowest level in nearly two years, the Commerce Department also reported.

Consumer spending rose by a pathetic 0.1 percent this past January, while incomes barely increased 0.2 percent in February, “further evidence that economic activity may have decelerated after strong growth for most of last year,” The Washington Post said.

“What’s more, adjusted pretax corporate profits fell slightly in the fourth quarter, marking the first decline in almost two years,” according to Market Watch.

The Trump tax cuts and a sharp increase in federal spending last spring and summer powered the economy’s liftoff into a higher orbit. Then other factors, especially the trade tariff battle with China and our other trading partners in Europe and North America, plus a stronger dollar, led to a weaker global economy.

Economists also blamed other factors. “The U.S. economy slowed more in the fourth quarter than previously thought, though partly because of the government shutdown,” says senior economist Sal Guatieri of BMO Capital Markets.

“The impact of the tax cuts is fading, but the underlying trend in activity still points more to a moderation in growth rather than a recession,” he added.

One bright spot in the economy is existing-home sales, which rebounded in February to the fastest pace in nearly a year, ending a three-month streak in declines, according to the National Association of Realtors.

That is in part due to the lowest mortgage rates in a year, more optimistic consumer expectations and the Federal Reserve’s promise to keep interest rates at bay to stabilize the housing market.

On the other hand, President Trump has been running into resistance to his efforts to boost U.S. manufacturing jobs.

General Motors announced last month that it will end production at the first of five North American plants it plans to close early next year in Michigan and Canada, due to declining demand. More than 4,000 autoworkers were employed there several years ago – that workforce has been cut to 1,400.

And the Ford Motor Co. announced last month that it is closing three plants in Russia as it withdraws from its passenger vehicle business in the country by the end of June.

Meantime, a survey of U.S. factories last month by the Institute for Supply Management showed that its index on employment and orders increased from 54.2 to 55.3, with three of its five main components indicating expansion and growth.

But recent sales figures in the retail industry sharply declined in February as consumers cut back on spending for building materials, groceries, furniture, electronics and clothing, according to the Commerce Department.

Building material sales fell sharply by 4.4 percent in February, and electronics retailers and supermarket sales dropped by just 1 percent. Department stores, clothing and furniture stores also suffered declines in sales.

But the rebound in factory activity and strong increase in construction spending “offered hope the economy was not slowing as sharply as previously feared,” writes Lucia Mutikani, business reporter for Reuters news service.

“The mixed reports on Monday prompted economists to raise their growth projections for the first quarter,” she wrote.

Still, others remained cautious.

“The economic downslide may be over,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania, “but there are no clear indications that an acceleration in growth is at hand.”

Donald Lambro has been covering Washington politics for more than 50 years as a reporter, editor and commentator.