U.S. Growth Accelerates, but Remains Short of Pace Promised by Trump

She cited impressive earnings reports from McDonald’s and Caterpillar recently, and currency gains should serve as a tailwind for corporate profits later this year.

In the first quarter of this year, the economy expanded at an annual rate of 1.2 percent, a disappointing showing by any measure and one that followed slow seasonal starts over the past several years.

As a result, economists initially expected a strong rebound, with the consensus in May calling for 3.7 percent growth. Those hopes came down to earth, however, amid lackluster spending by consumers, which accounts for roughly two-thirds of all economic activity.

Real Economic Growth

Annual rate of change in the gross domestic product, based on quarterly figures adjusted for inflation and seasonal fluctuations.

2nd quarter initial

Change at annual rate

The economy benefited last quarter from healthy consumer spending and exports, while less robust state and local spending, along with slower inventory growth, were a headwind.

Over all, the economy expanded at an annual rate of 1.9 percent in the first half of 2017, just a tad slower than the 2.3 percent average annual gain recorded from 2013 to 2016.

“The economy remains in a modest growth path, and last quarter was driven by gains in household and business spending,” said Michael Gapen, chief United States economist at Barclays.

“The surprise came in the area of trade, where it looks like solid growth outside the U.S. and a weaker dollar boosted exports,” Mr. Gapen added. “This is a turnaround from last year, when a stronger dollar was a drag on growth.”

With economists like Mr. Gapen forecasting growth of 2 percent to 2.5 percent in the second half of the year, the economy’s performance during Mr. Trump’s first year in office is likely to end up almost exactly in line with what prevailed under President Barack Obama.

“This is more of the same,” said Pat Newport, an economist at IHS Markit. “We are doing better than just about any other developed Western economy, even though this doesn’t meet the standards we’re used to. We’re the leader of a slow-moving pack.”

Nevertheless, the decent but hardly spectacular pace of the expansion camouflages some more profound shifts just under the surface of what is rapidly becoming a feast-or-famine economy. Sectors like technology, health care and Wall Street are thriving, even as industries like retail shed jobs and wage growth remains frustratingly slow.

Meanwhile, the stock market has been soaring and the housing market is similarly robust in many parts of the country, especially thriving coastal areas like New York, Washington, San Francisco and Boston. And at 4.4 percent, the unemployment rate is at its lowest point in a decade.

The figure released on Friday is the first of three estimates that the Commerce Department will provide on growth in April, May and June, and the final number could be revised higher or lower. Government statisticians refine their estimates as more data on factors like consumer spending, business investment, factory orders and imports and exports come in.

The White House has said that its long-term target for growth is 4 percent, and Mr. Trump has repeatedly said that the economy could grow even faster if regulations were rolled back and trade policies were toughened to encourage American companies to manufacture more of their products in the United States.

But many economists say that goal is unrealistic, given fundamental factors like an aging population and the retirement of the baby boomers, along with years of slow productivity gains.

The last time annual economic growth topped 4 percent was in 2000, at the tail end of the tech-fueled boom of the late-1990s. Since then, the American economy’s best annual performance was in 2005, just before the bursting of the housing bubble, when annual growth was 3.3 percent.

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