Ag Policy Blog

The U.S. general economic growth rate of 3.2 percent in the first quarter of 2019 is good news, but beneath that statistic there are reasons for concern, the American Farm Bureau Federation’s Market Intel service said.

“Personal expenditures have now been declining for the last three quarters,” Bob Young, former Farm Bureau chief economist, wrote in an analysis for Market Intel. “There has been only one quarter since 2015 with lower growth in consumer spending than the first quarter of 2019, and that was the first quarter of 2018. Is this a new annual pattern, or is this year-long trend of declining growth in consumer spending a darker sign?” Young wrote.

While the GDP number was over 3%, personal consumption added only 0.82% to GDP growth. A dive below the surface here is also revealing. These expenditures divide into goods and services, with goods split between durable and nondurable products. Overall spending on goods contracted to the point that it reduced the GDP by 0.14%. Durable goods were a 0.4%, or $23 billion (real), drag on the GDP, with motor vehicles and parts sliding 0.5%, or $26 billion (real), from the last quarter of 2018. Nondurable goods contributed 0.2% to the overall growth. The services sector, on the other hand, showed a 1% contribution to GDP growth. Health care services are a driving juggernaut in employment growth, and that carries through in GDP numbers. Health care services alone contributed 0.4% growth in GDP. Converting these percentages into real money, spending on health care expenses went up $21 billion on an annualized basis in the first quarter of 2019. This was the largest single category growth in all consumer spending.

In addition, Young wrote, “The investment figures are also worrisome. With the biggest contributor to the growth of that component coming from inventory build, weakness is showing in a second component of core GDP.”

https://www.fb.org/…

Jerry Hagstrom can be reached at jhagstrom@njdc.com

Follow him on Twitter @hagstromreport

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