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News April 26, 2019

U.S. Economy Crushes Estimates & Grows 3.2% In Q1

It’s a positive sign for the promotional products industry, which saw distributor sales rise 3.4% in the first quarter.

By  Christopher Ruvo

Trade war, the longest federal government shutdown in history and stock market instability couldn’t prevent the U.S. economy from smashing estimates and growing 3.2% during the first quarter of 2019, according to data from the Bureau of Economic Analysis.

The gain marked the first time that gross domestic product growth topped 3% in the first quarter since 2015. The increase came as exports rose 3.7%, while imports declined 3.7% -- a sign of positive progress against the trade deficit. The Commerce Department recently reported that the trade deficit narrowed more-than-expected to $49.4 billion in February,

The U.S.’s Q1 GDP performance “helps offset fears of slowing global growth,” Alec Young, managing director of global market research at FTSE Russell, told CNBC. “At a time of lingering U.S.-Chinese trade uncertainty and weak economic data everywhere from Germany to Korea to Japan, strong U.S. data acts as an insurance policy against further global economic weakness. And with inflation still subdued, it’s too early to start worrying about Fed rate hikes again.”

Various economists had predicted U.S. GDP growth to be between 1.5% and 2.8%. Economists polled by Dow Jones forecasted 2.5% growth. Analysts that Bloomberg surveyed put growth at 2.3%.

Still, the U.S. economy trounced expectations, outpacing last year’s fourth quarter annualized growth of 2.2% and 2018’s Q1 annualized growth rate of 2%.

The 3.2% increase in GDP resulted from “positive contributions from personal consumption expenditures (PCE), private inventory investment, exports, state and local government spending, and nonresidential fixed investment,” the Bureau of Economic Analysis said.

Personal spending increased 1.2%, but that was better than the forecasted 1%. Some analysts predict personal spending will rise in Q2, now that the partial federal government shutdown that lasted 35 days has ended and that tensions with China appear to be cooling as progress is being made toward a trade agreement between the world’s two largest national economies. There’s perhaps some evidence to support the prediction: After the shutdown ended and President Donald Trump’s late February announcement that he wouldn’t be increasing import tariffs on China, March retail sales increased 1.6%, the best gain since late 2017.

From a promotional products perspective, distributors sales increased 3.4% on average in the first quarter of 2019, slightly outdistancing the broader economy. More than one-third (36%) of distributors reported revenue rises in Q1 – nearly on par with a rolling average of recent quarters. During 2019’s first quarter, about 1-in-5 distributors reported a sales decline.

Nearly half (48%) of distributors that generate more than $1 million in annual revenue reported a sales increase in the year’s initial quarter. Some 40% of distributors in the $250,001 to $1 million revenue range also increased sales. Meanwhile, three in 10 distributors bringing in $250,000 or less said sales accelerated. The largest distributors – $1 million-plus category – produced the greatest average increase at 3.6%.