US consumer spending slows on lower outlays for services

Bloomberg

US consumer spending in the first quarter was even weaker than previously reported on lower outlays for services while business investment was revised higher, leaving the pace of economic growth at a still-solid 3.1 percent.
Consumer spending, the biggest part of the economy, grew at a 0.9 percent annual pace, according to a Commerce Department report, the slowest in a year and missing projections to remain at the prior estimate of 1.3 percent. Nonresidential fixed investment rose at a 4.4 percent rate, almost double what was previously reported, as spending on intellectual property was revised sharply higher to a 12 percent gain.
The data indicate consumers had less momentum ahead of trade tensions that have weighed on investment and led the Federal Reserve to consider cutting borrowing costs. At the same time, the figures may ease some concern about a slowdown in business investment at the start of the year.
The pace of growth remained well above what most experts see as the economy’s potential, and the US expansion next month will become the longest in the nation’s history. But analysts surveyed by Bloomberg project that gains in gross domestic product will cool to 1.8 percent in the second quarter, a two-year low, as President Donald Trump’s trade policies and slower global growth make companies more hesitant to hire and spend.
Excluding the trade and inventories components of GDP, which gave a substantial boost to growth, final sales to domestic purchasers increased at a 1.6 percent pace that was revised from 1.5 percent. Economists monitor this measure for a better sense of underlying demand, and Fed Chairman Powell said last week that first-quarter growth reflected “components that are not generally reliable indicators of ongoing momentum.”
Inflation was subdued in the first quarter, with Trump citing slow price gains as a rationale for Fed interest- rate cuts — and the Fed also concerned that inflation is too far below its 2 percent goal. But the report had slightly better news than before, as the personal consumption expenditures price index excluding food and energy rose at a 1.2 percent pace in the quarter, revised from 1 percent. The pace of GDP growth matched the previously reported 3.1 percent though was below projections for an upward
revision to 3.2 percent.
A separate report from the Labor Department showed filings for unemployment benefits rose to a seven- week high, a possible sign of strains in the labor market. Jobless claims increased to 227,000, compared with the median economist
estimate for 220,000.