Evidence of Economic Momentum

by: , Managing Director, Economist, and Portfolio Manager, New York Life Investment Management

Gross domestic product (GDP) growth was largely in line with expectations in the first quarter, with a 2.3% growth pace. That is slightly slower than Q4 2017, in which growth was 2.9%.

Slower growth in consumer spending was an important factor. Much of this slowdown, however, was driven by tapering car sales, following the post-hurricane surge seen last fall.

With solid household income growth and upbeat consumer confidence, consumer spending is set to remain an important growth driver, and the pick-up in retail sales towards the end of the quarter bodes well for Q2.

Business investments in real estate, equipment, and software showed a decent growth rate of 7.3%.

Getting to 3% for the Full Year?

So far, numbers have not reached the 3% mark. However, quarterly growth rates are notoriously noisy, and we would be careful about extrapolating from one quarterly number alone. Many indicators have shown significant acceleration over the recent six months, and company guidance on capital spending plans has been very positive in Q1 earnings calls.

GDP: Signs of Acceleration Heading into Second Quarter

Sources: Thomson Reuters Datastream, New York Life Investments, as of 4/27/18.

The Bottom Line

A 2.3% growth pace is a decent pace of growth, but by no means stellar. We believe the economy is set to accelerate to a growth pace above 3% in the near term, as both business equipment investments and consumer spending are set to contribute.

Opinions expressed are current opinions as of the date appearing in this material only. The information and opinions contained herein are for general information use only. MainStay Investments does not guarantee their accuracy or completeness, nor does MainStay Investments assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice, and are not intended as an offer or solicitation with respect to the purchase or sales of any security or as personalized investment advice. There can be no guarantee that any projection, forecast, or opinion in these materials will be realized. Past performance is no guarantee of future results.

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New York Life Investments is a service mark and name under which New York Life Investment Management LLC does business. New York Life Investments, an indirect subsidiary of New York Life Insurance Company, New York, New York 10010, provides investment advisory products and services. NYLIFE Distributors LLC is located at 30 Hudson Street, Jersey City, NJ 07302. NYLIFE Distributors LLC is a Member FINRA/SIPC.


Poul Kristensen, CFA

Managing Director, Economist, and Portfolio Manager, New York Life Investment Management

Poul Kristensen, CFA is Managing Director, Economist, and Portfolio Manager with New York Life Investment Management’s Multi Asset Solutions (MAS) team

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