April 30, 2018 — Q1 GDP Slows, but Beats Expectations


The US economy slowed in the first quarter due to the weakest consumer spending in nearly five years.  The news is not that bad, as the setback is seen as temporary with the labor market tightening, strong levels of consumer confidence and fiscal stimuli coming into play.

GDP increased at 2.3 percent beating expectations for a 2 percent rise, but far behind the 2.9 percent reported in Q4 2017.  First quarter GDP is traditionally slow due to seasonality, and this year, first quarter business spending and investment in home building were weak.

Economists think growth will accelerate in the second quarter when the effects of the Trump tax package are felt.  Lower corporate and income taxes, along with increased government spending, are expected to lift GDP close to 3 percent.  The Fed is likely to discount the slow start to the year, and will still be on board for at least two-three additional interest rate hikes later this year.  The number of hikes will be clearer midyear.

By hedging through the use of an interest rate swaps, you will be able to save on future interest payments by locking into the lower rates that are available right now.