April 18, 2019 – Looking in the rear view mirror at first quarter gross domestic product (GDP), the economy was on weaker footing than our estimate for 1.9 percent (annualized) growth suggests. For starters, real consumer spending likely rose just 0.5 percent for the quarter as spending on durable goods such as auto sales decelerated. Business investment likely remained modest in Q1 at around 4 percent, with continued spending on research and development and equipment purchases. The downshift in consumption and investment over the last two quarters resulted in a faster pace of inventory building and far fewer imports, both of which boosted GDP growth in the first quarter, even with the soft consumer spending.
Looking ahead to the second quarter, Visa’s April U.S. economic forecast continues to show that growth will likely pick up to around 2.5 percent in Q2 as consumer spending rebounds. Much like the past several years, growth will likely be strongest in the second and third quarters of this year. GDP is expected to grow 2.5 percent in 2019 following last year’s 2.9 percent pace, with nominal consumer spending rising 4.3 percent. After accounting for inflation, consumer spending will likely be lower this year—2.3 percent—than last year’s 2.6 percent pace. Slightly softer auto sales account for at least some of the slower spending expected this year.